Recently, Forbes.com published an article titled, The Franchise Dating Game: Finding Your Perfect Franchise Match. The article analogizes the process of choosing a franchise to that of finding “your perfect life partner,” and it discusses six steps that prospective franchisees can take to narrow down their options until they find the “right” franchise opportunity. We have discussed these steps before in various articles covering the topic of due diligence. But, it is interesting to examine them in the “dating game” context; and, as due diligence is one of the most-important steps involved in buying a franchise, we thought we would share our thoughts on these tips for finding “The One”: 1. “Know Your Personal Interests, Strengths and Goals” This is a critical factor in choosing a franchise opportunity. Even if a franchise appears to have significant profit potential generally, if you are not interested in the nature of the business, and if you are not passionate about the product or service you would have to sell, then it is probably not the franchise for you. 2. “Know Your Figures” Different types of franchises require different levels of financial investment; and, even among competing franchised brands, some franchisors demand higher initial franchise fees, royalties, and marketing fund contributions than others. While these higher costs may (or may not) be justified, overextending yourself financially can limit your ability to survive the initial months of operation when your franchise isn’t generating a profit. 3. “Get Online” These days, there is no shortage of […]

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A few days ago, the United States District Court for the Northern District of Illinois denied a plaintiff franchisee’s preliminary injunction request, thereby dooming the ‘Halal Guys’ franchisee’s legal attempt to remain in business after it was terminated by its franchisor. As with many other restaurant franchise terminations, the franchisee in this case was repeatedly defaulted for health and other operational food violations. At the end of the day, the federal court was not persuaded by the franchisee attorney’s focus on an email in which one of the franchisor owners had told the quality inspector to ‘go hard’ on the franchisee when conducting one of the last inspections. As the Court noted, the franchisee had failed to establish its right to the emergency injunction because it failed to individually specifically address, and rebut, under oath, each of the alleged food violations upon which the termination was based. The Court’s analysis of the denial of the emergency relief was exceedingly traditional; however, the decision did appear to contain a small analytical inconsistency when it found both that the plaintiff franchisee had an ‘adequate remedy at law’ [through a damages award in a later trial down the line] and that the franchise brand might not suffer if the Court had chosen to allow the franchisee to continue operating as a branded restaurant. H Guys Ltd. Liab. Co. v. Halal Guys Franchise, Inc., No. 19-cv-4974, 2019 U.S. Dist. LEXIS 124052 (N.D. Ill. July 25, 2019) Please Click on the Link Below to Read […]

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In July, the franchisor of the Jamba Juice franchise system (which offers “smoothies, juices and bowls”) announced that the system would be dropping “Juice” from its name and re-branding simply as “Jamba.” As reported by Blue MauMau, “[t]he change in brand comes as a rising tide of press from Time magazine to the Washington Post have reported that drinking juice can be as unhealthy as consuming soda.” Interestingly, however, juice will remain one of the brand’s core offerings, even though the franchisor’s president touted the re-branding as an effort, “to meet our guests’ ever-changing definition of wellness.” Admittedly, the branding exercise does come with some menu changes. However, according to Blue MauMau, it also comes with a requirement for franchisees systemwide to purchase new signage and packaging for their products (and of course menus). Franchisees will also be required to “invest” in a large-scale store remodel and begin allowing customers to order ahead and have their orders delivered by Postmates and Uber Eats. All of this comes as systemwide sales are down year-over-year and as the number of franchisees in the system is dropping. Dealing with (and Paying For) Mandatory Updates as a Franchisee As is typically the case, this appears to be a top-down overhaul. Franchisors routinely require their franchisees to adopt (and pay for) updates to their outlets—with varying degrees of investment and success. Regardless of whether dropping the word “Juice” from the brand will draw in more health-conscious customers, the only thing that is certain for the […]

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If you are a veteran and you are thinking about buying a franchise, you are not alone. Thousands of franchises are owned by veterans, and the U.S. Department of Veterans Affairs (VA) promotes franchise ownership as an alternative for former military servicemembers and officers who are thinking about going into business for themselves. According to the International Franchise Association (IFA): “Even though veterans account for about 7% of the population, 14% of franchisees are vets . . . and 65% of franchisors have indicated that their rate of hiring veterans has increased in recent years.” Of course, buying a franchise comes with financial risk. To help reduce the cost of ownership, many franchisors and other businesses and organizations offer benefits to veterans. Here is a list of some of the benefits that are available, as well as a list of resources for veterans who are thinking about buying a franchise: The International Franchise Association’s (IFA) VetFran Program Under the IFA’s VetFran program, participating franchisors offer discounts and other financial incentives to veterans who have been honorably discharged from the U.S. armed forces. Many suppliers offer waived or reduced fees to veterans through the program as well. Currently, more than 600 franchisors participate in the VetFran program. The IFA rates participating franchisors with up to five-star ratings, with higher ratings reflecting the IFA’s view of the franchisor’s commitment to the ideals of VetFran. Of course, in addition to reviewing these ratings, veterans who are considering franchise opportunities under VetFran should conduct […]

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According to news reports, over the past 10 months Dunkin’ Donuts Franchising LLC has sued more than 30 of its franchisees alleging that they have hired undocumented workers in violation of federal law and the terms of their franchise agreements. As a remedy, the franchisor is not seeking to compel proof that the franchisees’ employees are lawfully in the United States or that they only employ documented workers, but instead it is seeking to terminate their franchises. At least one franchisee has countersued alleging that it was not afforded a sufficient opportunity to cure and that Dunkin’ is attempting to resell its franchise without any payment of compensation. As summarized by The New Food Economy: “Since September 2018, the company has sought to close almost 30 East Coast restaurants, bringing their owners to court in a recognizable pattern. In at least three instances, Dunkin’ reviewed store records, found franchisees hadn’t verified the employment status of their workers, moved to terminate the franchise agreement, and then took the store owners to court to enforce it. . . . Dunkin’ has a reputation for taking franchisees to court who don’t comply. During an 18-month period in 2006 and 2007, for example, the company filed over 100 lawsuits, the vast majority of which were brought against store owners . . . .” The current spate of lawsuits is interesting for a number of reasons, not the least of which is that they appear to be one of the first efforts in franchising to […]

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In this breach of contract and trademark infringement case, where the pizza restaurant franchisor, Little Caesars Enterprises, Inc., sued the franchisee operators of several pizza restaurants for repeatedly violating the franchise agreement by, inter alia, violating operational standards, failing to pay royalties, and operating with the Little Caesars trademarks after the franchise terminations, the United States District Court for the Eastern District of Michigan granted the franchisor’s request for a preliminary injunction, thereby shutting down the franchisees’ operation of the restaurants pending trial; in so doing, the Court rejected resoundingly the franchisees’ poorly constructed and irrelevant legal and factual defenses to the preliminary injunction. Little Caesar Enters., United States District Court for the Eastern District of Michigan, Southern Division, July 16, 2019, Decided, 2019 U.S. Dist. LEXIS 117942 Please Click On Link Below to Read Full Decision. Little Caesar Enters._ 2019 U.S. Dist. LEXIS 117942

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Last February, we covered the launch of what was reportedly the first cannabis dispensary franchise offered in the United States. A lot has happened since that time. As more states have made the move to legalize or decriminalize marijuana, and as scientific research continues to dispel longstanding misconceptions about the effects and health risks associated with cannabis, cannabidiol (CBD) and other marijuana compounds, new businesses are popping up all over the country, and more and more of these businesses are turning to franchising as a way to grow their brands. As explained in a recent article from Franchise Direct: “According to JWTIntelligence, about 20% of American adults now have access to legal marijuana, and retailers . . . have been quick to jump on the new potential revenue stream. For example, Colorado saw well over $1 billion in cannabis sales in 2017 alone. . . . Brightfield Group predicts the CBD market will soon be a $22 billion industry.” In addition to dispensaries, there are now franchise opportunities for cafés that sell cannabis and CBD products, medical marijuana businesses, and other retail-based outlets. As of the end of May 2019, cannabis has been fully legalized in 10 states and Washington D.C., and many other states have taken intermediate steps such as decriminalizing marijuana, and legalizing the use of marijuana for medicinal purposes only. Of course, at the federal level, marijuana is still a Schedule I controlled substance. As a result, prospective franchisees face a number of unique legal issues above and […]

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The United States District Court for the District of New Jersey rejected the petroleum franchisor’s request to dismiss on summary judgment the gasoline dealer franchisee’s case for wrongful termination because, according to the Court, the defendant bears the burden of proof in actions under the PMPA, and the bulk of defendant’s evidence was testimonial and thus subject to credibility determinations; material disputes existed regarding the following facts, going to the franchisor’s good faith in demanding changes to the renewal agreement: (1) the existence of a formula for calculating increases in rent at Defendant’s franchises — although Defendant contended such a policy exists, it cited oral deposition, in-court testimony, or affidavits, uncorroborated by any written policy; (2) whether the petroleum franchisor’s employees, Deakin and McGee, in fact warned plaintiff that rental values would increase when they initially met; (3) whether the franchisor’s employees, Deakin and McGee, suggested, during that initial meeting, that plaintiff franchisee could operate a truck stop at the property; (4) whether defendant failed to provide the franchisee dealer with training; whether the franchisee’s need for training was apparent; and whether the franchisor had a training program that was available; (5) whether the franchisor placed franchisee dealer’s account on COD status in retaliation for her request to operate the station as a commission; (6) whether the franchisor defendant had a motive not to renew the agreement, as shown by the strained relationship between Sathu, Deakin, and McGee; (7) defendant franchisor received an offer from Tim Horton’s to open a franchise at the location; and (8) the substantial increase in rent, which […]

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Tyler, the Franchisee Dealer, alleged a violation of the Automobile Dealers’ Day in Court Act; breach of contract; and tortious interference with existing contractual relations; all arising out of the Pierce defendants’ allegedly unlawful and fraudulent conduct toward Tyler concerning the marketing, sale, and service of fire and rescue trucks and related goods and equipment in the States of New York and Pennsylvania; the Court, however, dismissed the Franchisee Dealer’s claims because the Automobile Dealers’ Day in Court Act does not cover fire trucks; a contract terminable at will cannot be the basis of a tortious interference claim; and “in the absence of explicit contractual language stating that a party may not unreasonably withhold consent, parties may withhold consent for any reason or no reason, and that no implied obligation to act in good faith exists to limit that choice.” Tyler Fire Equip., LLC v. Oshkosk Corp., No. 14-CV-6513-CJS, 2019 U.S. Dist. LEXIS 104539 (W.D.N.Y. June 21, 2019) Click On Link Below to Read Full Decision Tyler Fire Equip._ LLC v. Oshkosk Corp._ 2019 U.S. Dist

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Plaintiff Nurse Next Door Home Healthcare Services (USA), Inc.’s Motion for Default Judgment against Defendant Four Gloves, Inc., the franchisee, is GRANTED in part and DENIED in part, such that Plaintiff is entitled to damages of unpaid fees of $55,000 and royalties of $81,250, totaling $136,250, based primarily on the Court’s conclusion that Nurse Next Door is entitled to that amount which “to the extent possible, put[s] the injured party in as good a position as that party would have been in had the contract been performed,” specifically royalty payments for the five-year term, but specifically not those other fees (7% and a monthly technology fee), since under the Franchise Agreement the latter fees assumed the use by the franchisee of the Nurse Next Dorr’s Care Services Center, which, due to the termination, had never been made by the franchisee. Nurse Next Door Home Healthcare Servs. (USA) v. Four Gloves, Inc., Civil Action No. 8:18-cv-02101-PX, 2019 U.S. Dist. LEXIS 106612 (D. Md. June 26, 2019) CLICK on Link to Read Nurse Next Door Home Healthcare Servs. (USA) v. Four Gl Full Decision

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