The Franchise Memorandum

In Doctor’s Associates Inc. v. Agnello, 2009 WL 2526171 (S.D.N.Y. July 28, 2009), a federal magistrate judge considered a request by a franchisor for damages against a former franchisee who had used the franchisor’s trademarks in connection with the operation of a strip club. The franchisee had formerly operated a Subway restaurant. After the franchisor terminated his franchise agreement, the franchisee continued to use the Subway trademarks to operate a deli at a different location during the day, and also began operating a strip club at that deli at night, advertised as “Cousin Vinny’s Little Secret.” The franchisee used the Subway trademarks in operating both businesses.

The franchisor had obtained an injunction barring the franchisee from continuing to use its trademarks, and filed a subsequent motion seeking treble damages for the franchisee’s trademark infringement. The court recommended awarding such damages, finding that the franchisee “clearly acted with a deceptive intent” in continuing to use the Subway trademarks. The court based its treble damages award on the profits that the franchisee earned from both of his businesses.