Monthly Archives: May 2015
KFC Franchisee Terminated For Not Remodeling
May 7, 2015 - Franchise Articles by Jeffrey M. Goldstein |KFC Corp. v. Kazi, Slip Copy, 2013 WL 2257606 (W.D.Ky. 2013) A federal court in the Western District of Kentucky on May 22, 2013, decided in essence to wipe out the protections that had been given to a KFC franchisee in a formal written settlement agreement that had resolved a previous remodeling dispute between the franchisor and franchisees in the Kentucky Fried Chicken System. On May 2, 2011, the franchisee Defendants’ franchise agreements for its California stores were terminated when Defendants failed to comply with the agreements' express conditions and several remodel agreements. As part of the Settlement Agreement, KFCC reinstated Defendants' franchise agreements for three California stores, conditioned on Defendants remodeling the stores by certain deadlines. In this case, KFCC moved to enforce the parties' Settlement Agreement, asking the Court to order the franchisee to close the stores because the franchisee did not meet its remodeling obligations that had been reestablished in the settlement agreement. The Settlement Agreement provided the consequences for Defendants' failure to remodel in a timely manner. In Paragraph 4(c), the Settlement Agreement stated: “If the upgrade actions set forth in paragraph (a) above are not completed within the Time Frame for any California Stores, the Respective Franchisees must close and complete for each non-upgraded California Store the De–Image Obligations as described in paragraph 12 below no later than thirty (30) calendar days after the respective Time Frame.” The franchisees did not meet this deadline, although they had what they viewed to be a valid legal […]
Not Many Bullets Left for Car Franchisee – Case Identification Summer 2013
May 7, 2015 - Franchise Articles by Jeffrey M. Goldstein |Volvo Trucks North America v. Andy Mohr Truck Center, Slip Copy, 2013 WL 2938913 (S.D.Ind. 2013) This case involves at bottom an incredibly common allegation made in franchise litigation: that a franchisor made an oral misrepresentation to the franchisee in order to entice the franchisee to sign the franchise agreement and then failed to perform on that promise. This case also is a perfect example showing how lopsided franchise law has become over the last 5-10 years. In this case, the court appears to go out of its way to construe even specific, admittedly applicable, “pro-franchise” legislation, which was passed to balance the economic inequities between franchisors and franchisees, to the ultimate advantage of the franchisor. The only reason that a small portion of the franchisee’s case remained in place after this decision is that the state’s law in issue, Indiana, had a couple of esoteric non-franchisee specific consumer statutes that had not yet been definitively interpreted to bar franchise misrepresentation claims.
No Ice Cream (or Claims) for Gelato Franchisee – Case Identification Summer 2013
May 7, 2015 - Franchise Articles by Jeffrey M. Goldstein |Palermo Gelato, LLC v. Pino Gelato, Inc., 2013 WL 3147312 (W.D.Pa.) Many legal doctrines have developed over time to shield franchisors from suits based on fraudulent statements they have made to franchisees to induce them to purchase franchises. One such doctrine is the parol evidence rule, which prohibits franchisees from introducing evidence of a franchisor’s fraudulent representations if the franchise agreement in dispute can be characterized as being “the entire agreement” between the parties.
The Stars and Planets Align for Franchisor Loss on Post-Term Covenant Enforcement Action
May 6, 2015 - Franchise Articles by Jeffrey M. Goldstein |Novus Franchising, Inc. v. Dawson, 2013 WL 3970250 (C.A.8 (Minn.)) In many court cases in which a franchisor sues its former franchisee to prevent the former franchisee from operating an independent non-franchise-trademarked business after a termination of the franchise agreement, the franchisor prevails, in that the court issues an order preventing and banning the former franchisee from operating his or her business. However, in a recent case out of the Eighth Circuit federal court of appeals, which is one of the – if not the most — conservative of the thirteen federal circuit courts in the country, a three-judge appellate panel affirmed a trial judge’s refusal to grant the franchisor’s motion for a preliminary injunction to enforce the post-term covenant-not-to-compete in the franchise agreement.
Franchisees’ Weapons Turned on Them in Court – May 26, 2014 Allstate Franchisees
May 6, 2015 - Franchise Articles by Jeffrey M. Goldstein |Franchisees’ Weapons Turned on Them in Court – Allstate Agent Franchisees New Jersey is normally considered a ‘good state’ for franchise lawyers who represent only franchisees and dealers. This case, however, shows that on any given day, and despite the sophistication of legal representation, franchisees are subject to being blown out of the water on almost any ground. In this case, we see the Court use two relatively potent pro-franchisee legal weapons – the New Jersey Franchise Protection Act and the common law covenant of good faith and fair dealing – to bludgeon the franchisees to a legal death.
Not All Franchisor Silence is Golden – Failures to Speak and Fraud in the Franchise Context (June 2014)
May 6, 2015 - Franchise Articles by Jeffrey M. Goldstein |David Abbo, Colorado Toyz, Inc., and Wireless Phones, L.L.C.v. Wireless Toyz Franchise, L.L.C., Joe Barbat, Richard Simtob, Jsb Enterprizes, Inc., and Jack Barbat, 2014 Wl 1978185, Court Of Appeals Of Michigan (May 13, 2014) Wireless Toyz Franchise, L.L.C. (WTF), a franchisor, and David Abbo, its franchisee, initially entered into a franchise agreement for a retail store in Colorado and subsequently signed a development agent agreement under which Abbo was required to open additional Wireless Toyz franchise stores. Wireless Toyz franchises are retail stores that sell electronic communication devices and initiate cellular telephone services with various providers. Franchisees earn commissions by selling third-party service contracts and additionally profit by marketing cell phones and related merchandise. Abbo paid a $20,000 franchise fee, in addition to $180,600 for the exclusive right to market and sell Wireless Toyz franchises throughout Colorado.
Franchisees’ Legal Scorecard for June 2014 — Franchise Purchase and other Dangerous Transactions
May 6, 2015 - Franchise Articles by Jeffrey M. Goldstein |More Franchisee Dis-Information To Grease the Efficient Franchise Purchase Information Market The most serious mistake that potential franchisees make is to rely exclusively upon their franchisors to provide them with information regarding potential franchise investments. The Franchise Disclosure Document (FDD) for sure provides some information, although far too little. Indeed, the FDD is deceptively useless if prospective franchisees limit their due diligence solely to the FDD and any other information given to them by franchisors. In this regard, Item 20 of the FDD was supposed to serve the altruistic and efficiency-promoting purpose of providing the potential franchisee with a gateway to obtaining other valuable sources of information about the franchise system, most notably contact information for current and former franchisees of the system.
RE/MAX FRANCHISEE OUT-MANEUVERS LEGAL CLUTCHES OF DEFECTIVE RESTRICTIVE COVENANTS NOT TO COMPETE
May 6, 2015 - Franchise Articles by Jeffrey M. Goldstein |RE/MAX of New England, Inc., and RE/MAX, LLC, Plaintiffs v. Prestige Real Estate, Inc., d/b/a LAER Realty Partners, Stacey Alcorn, and Andrew F. Armata, Defendants, U.S. District Court, D. Massachusetts, July 7, 2014. A real estate brokerage franchisor RE/MAX of New England, Inc. was denied a temporary restraining order or preliminary injunction after one of its franchisees terminated its relationship with RE/MAX and started to do business under a different name. According to the Court, in denying RE/MAX's motion for temporary restraining order and preliminary injunction, the real estate franchisor failed to demonstrate a likelihood of success on the merits of any of its claims. The franchisee, Prestige Real Estate, Inc. entered into 13 franchise agreements with RE/MAX, each for a different real estate office. Three of the agreements had expired prior to the dispute and had been continued on a month-to-month basis. The other ten agreements were active when, in April 2014, Prestige sent RE/MAX a demand letter terminating their relationship. The franchisee, Prestige, subsequently started doing business as LAER Realty Partners.
Baloney, Big Macs, the NLRB, and Franchise Advocacy
May 6, 2015 - Franchise Articles by Jeffrey M. Goldstein |A column last week in the Los Angeles Times, entitled “The NLRB-McDonald’s Ruling Could Be the Beginning of a Franchise War” is another example of how top franchise industry ‘experts’ and ‘talking heads’ too frequently lack sufficient knowledge about the facts and theories they are discussing. Most notably, for example, contrary to the ‘fact’ set forth in the column, the NLRB matter was not a ‘ruling’ nor was it ‘issued’ by the NLRB. It was, instead, a policy decision made by a rank political appointee in the NLRB. This was nothing more than a personal choice made by the NLRB’s ‘in house’ counsel to include McDonald’s as a named defendant in certain pending internal NLRB labor cases. This choice was not litigated before the ALJ, the NLRB or the courts.
Consult a Franchise Attorney for Franchisor Misrepresentation
May 6, 2015 - Franchise Articles by Jeffrey M. Goldstein |Do you suspect that your franchisor misrepresented important details about its product, or the company itself? Misrepresentations to franchisees violate the Franchise Disclosure Rule. To get a clearer idea of how this has violated your rights, consult a franchise attorney.
