Franchise networks and dealer networks both achieve scale by separating ownership from brand control and by distributing execution across many local businesses. Because the agreements that govern these networks cannot anticipate every future contingency and because both sides invest in assets that are highly specific to the relationship, the same disputes recur: territorial encroachment that is increasingly driven by centralized e‑commerce and delivery applications; disagreements over national advertising funds or cooperative marketing funds; frictions over vendor and parts rebates; price, termination, and renewal conflicts; and, in dealer systems in particular, disagreements over warranty reimbursement and the permissibility of direct‑to‑consumer sales models. These outcomes are not random or idiosyncratic. They are the predictable result of incomplete contracting, relationship‑specific investments, and multi‑dimensional performance that is difficult for a court to verify after the fact. A microeconomic governance lens—combining Transaction‑Cost Economics (TCE), which explains why parties choose particular governance structures, with the logic of relational contracts, which explains how repeated dealings can support credible informal promises, and a practical deterrence program—turns these ‘never‑ending problems’ into design choices about information, remedies, and the value of the future. Summary The purpose of this paper is to provide a practical governance playbook for both franchising systems (franchisors and franchisees) and dealer systems (manufacturers and dealers). The playbook is grounded in TCE, in the economics of relational contracts, and in a straightforward deterrence framework that rests on three pillars: better signals, verifiable sanctions, and a credible future. The aim is to reduce wrongdoing, litigation, and distrust by […]

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Abstract This article explains briefly and informally how a compact deterrence framework organizes conduct in franchising and analogous dealership channels. p·F ≥ G states that a deviation is unattractive when the expected penalty (probability times sanction) meets or exceeds the private gain, following Becker (1968). The analysis combines operational instrumentation, contractual fee architecture, and event‑triggered remedies into one explanatory model that travels cleanly between the outlet and the corporate center. Its practical value is less about punishment than about design: when evidence is a by‑product of normal operations and outcomes trigger on observable events, participants coordinate on compliance with fewer disputes. Although the literature often foregrounds franchisee non‑compliance, franchisor opportunism is under‑represented in published work and, in practice, is both more rampant and more difficult to detect and prove because it is embedded in policy decisions and paper processes. The article therefore places special weight on headquarters transparency and self‑executing remedies to restore symmetry in detectability and sanctions. By reframing familiar conflicts as tractable choices over gain (G), detection (p), and sanction (F), the framework converts diffuse debates into measurable decisions. Introduction This article offers a third‑party account of franchise behavior that uses an expected‑value inequality, rather than moral exhortation, to explain why deviations rise or fall. Actors compare the private gain from deviating G with the expected penalty p·F, and when the latter meets or exceeds the former, the shortcut no longer pays in expectation (Becker, 1968). While most case discussions dwell on unit‑level issues, many of the largest, […]

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In the case BrightStar Franchising, LLC v. Foreside Mgmt. Co., No. 1:25-cv-08741, 2025 U.S. Dist. LEXIS 213306 (N.D. Ill. Oct. 29, 2025) the federal court faced the issue of determining whether Illinois or California law applied to the non-compete clauses in the franchise agreements. The agreements included an Illinois choice-of-law provision, which the franchisees challenged, arguing for the application of California law. Illinois generally honors such provisions unless the chosen state has no substantial relationship to the parties or the transaction, or if applying the chosen law would contravene a fundamental public policy of a state with a materially greater interest. The franchisees argued that California law, specifically Section 16600 of the California Business Code, per se invalidates the restraints on competition in the franchise agreements. However, the court found that the California Supreme Court’s decision in Ixchel Pharma, LLC v. Biogen, Inc. clarified that Section 16600 does not per se invalidate such restraints in a commercial context, applying a reasonableness standard instead. The court determined that the relationship between BrightStar and the franchisees was a business relationship, not an employment relationship, and thus subject to the reasonableness standard under Ixchel. Consequently, the court concluded that the franchisees did not demonstrate a conflict of laws that would affect the outcome, and therefore, the Illinois choice-of-law provision in the franchise agreements was applied. Regarding the preliminary injunction, the court found a strong likelihood of success on the merits for BrightStar’s breach of contract claims under Illinois law. The franchise agreements were […]

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The Wisconsin federal court’s decision in Sunrise Marine, LLC v. Aqua Traction Marine, LLC, No. 25-CV-722, 2026 U.S. Dist. LEXIS 1409 (E.D. Wis. Jan. 6, 2026) is best understood as reflecting the WFDL’s long‑recognized pro‑dealer (pro-franchisee) character. By broadly construing contractual protections, recognizing inaction as a basis for statutory liability, interpreting accrual in a manner that preserved the dealer’s claim, and sustaining all of Sunrise’s causes of action at the pleading stage, the court strengthened the dealer’s ability to hold the supplier accountable for conduct that undermined the competitive viability of its exclusive territory. For these reasons, the case should be viewed as a strongly pro‑franchisee, pro‑dealer decision within the broader landscape of Wisconsin dealership and franchise jurisprudence. Decision The court’s decision in Sunrise Marine, LLC v. Aqua Traction Marine, LLC was strongly pro‑dealer, holding that Sunrise Marine plausibly alleged violations of the Wisconsin Fair Dealership Law and that Aqua Traction’s failure to enforce territorial protections could constitute both a statutory violation and a breach of contract. The judge denied Aqua Traction’s motion to dismiss in full, applying the WFDL liberally in favor of protecting the dealer. Aqua Traction Marine, LLC manufactured custom flooring for recreational boats and had operated a dealership network. Sunrise Marine, LLC had served as one of its dealers since 2019 under an agreement granting Sunrise an exclusive territory covering roughly the eastern third of Wisconsin and a portion of Michigan’s Upper Peninsula. The dealership agreement stated that Aqua Traction would protect each dealer’s territory and […]

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Introduction The majority opinion in Davis v. Bimbo Foods Bakeries Distribution, LLC, No. 24-2264, 2026 U.S. App. LEXIS 439 (4th Cir. Jan. 8, 2026) held that an automated grocery fulfillment center could be considered a “retail store” under the relevant contract, finding ambiguity in the term and relying on extrinsic evidence to interpret its meaning. The district court’s approach, which was affirmed by the majority, involved looking beyond the plain meaning of “retail store” and considering trade usage and the specific context of the distribution agreement. The majority rejected the argument that only facilities primarily selling merchandise directly to ultimate consumers qualify as retail stores, instead adopting a broader interpretation that could encompass automated fulfillment centers. The dissent in Davis v. Bimbo Foods Bakeries Distrib., LLC argued that an automated grocery fulfillment center does not qualify as a “retail store” under the plain meaning of the term, as it does not primarily sell merchandise to ultimate consumers but instead functions mainly as a warehouse for storing and shipping products. The dissent criticized the district court for finding the term “retail store” ambiguous and relying on extrinsic evidence, rather than applying its ordinary dictionary definition as required by Pennsylvania law. It was concluded that the fulfillment center should not be considered a retail store, and thus the district court’s judgment should be reversed. In the end, as discussed below, parol evidence gave the court a complete picture of how the relevant terms functioned in practice. It allowed the judge to interpret […]

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The case of McLaren v. UPS Store, Inc., No. 21-14424 (RMB/MJS), 2025 U.S. Dist. LEXIS 228406 (D.N.J. Nov. 20, 2025) centers on allegations that The UPS Store, Inc. (TUPSS) and certain of its New Jersey franchisees systematically overcharged consumers for notary services, in violation of New Jersey law capping notary fees. Plaintiffs Barbara McLaren and Vincent Tripicchio, representing themselves and a putative class, claimed that for over a decade, TUPSS and its franchisees charged notary fees exceeding the statutory maximum, thereby violating the New Jersey Consumer Fraud Act (CFA), the Truth-in-Consumer Contract, Warranty, and Notice Act (TCCWNA), and principles of unjust enrichment. The plaintiffs sought relief for themselves and similarly situated consumers. The facts established that New Jersey law, specifically N.J. Stat. Ann. § 22A:4-14, set a maximum fee of $2.50 for certain notarial acts. Despite this, McLaren was charged $10 for two acknowledgments (instead of $5), and Tripicchio was charged $15 for a power of attorney notarization (including a $12.50 “Notary Convenience” fee), both at TUPSS franchise locations. The franchisees provided no additional services beyond the notarial act itself. TUPSS operated through a network of franchisees, requiring them to execute a Franchise Agreement and adhere to an Operations Manual. The agreement mandated compliance with all applicable laws, including those governing notary fees, and required franchisees to offer notary services, maintain certain staffing levels, and use a uniform point-of-sale system. TUPSS also provided extensive training, issued directives on notary pricing, and closely monitored franchisee operations, including notary transactions and revenues. TUPSS […]

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In Fiesta Ventures Bevercreek, Ltd. Liab. Co. v. Qdoba Rest. Corp., No. 24-CV-2218 JLS (BLM), 2025 U.S. Dist. LEXIS 162943 (S.D. Cal. Aug. 21, 2025), the dispute arose from a series of franchise agreements and subsequent defaults between Fiesta Ventures entities (FVD and FVB) and Qdoba, the franchisor. The relationship began in 2012, with Fiesta Ventures operating Qdoba restaurants under franchise agreements. By 2019, only one location remained under operation. In July 2019, the parties entered into a development agreement for a new restaurant in Bevercreek, Ohio, which led to a new franchise agreement in April 2023. However, the Bevercreek location failed to open on time due to leasing issues, prompting Qdoba to issue a notice of default in February 2024. Rather than immediately terminating the franchise agreement, the parties entered into a Workout Agreement, which required the Bevercreek restaurant to open by May 31, 2024, and included a provision making affiliates of FVB (including FVD and the individual owners) liable for any future default. Qdoba extended the opening deadline three more times, but after the landlord terminated the lease, Qdoba terminated FVB’s franchise agreement. FVB attempted to cure the default, but Qdoba did not reconsider its decision. Subsequently, Qdoba also terminated FVD’s franchise agreement, relying on the Workout Agreement’s affiliate liability provision. Fiesta Ventures sued Qdoba, alleging breach of contract and unfair business practices under California law. Qdoba counterclaimed, seeking declaratory judgments regarding the terminations, lost future royalties for both agreements, attorneys’ fees, and enforcement of personal guarantees. Fiesta Ventures […]

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The case of Simpson v. Osteostrong Franchising, LLC, Civil Action No. 4:19-CV-02334, 2025 U.S. Dist. LEXIS 187471 (S.D. Tex. Sep. 23, 2025) centers on a dispute between a franchisor, Osteostrong, and several of its former franchisees and regional developers, including Sean and Charla Simpson, over the enforceability of franchise agreements, alleged misrepresentations, and the consequences of franchisee conduct following the breakdown of their business relationship. The franchisor, Osteostrong, operates a global franchise system offering wellness services through specialized equipment. Between 2013 and 2017, the franchisees entered into agreements to operate Osteostrong franchises in various states, and some, like the Simpsons, also entered into regional development agreements. Before entering these agreements, the franchisor provided Franchise Disclosure Documents (FDDs), which, as later discovered, failed to disclose that a key executive, Manny Butera, had a felony conviction and bankruptcy history within the prior ten years—information required to be disclosed under federal and state franchise laws. The franchisees alleged that this nondisclosure rendered the franchise agreements illegal, void, and unenforceable, and sought summary judgment on the franchisor’s breach of contract counterclaims and on the enforceability of general releases they had signed. The franchisor, in turn, sought summary judgment on the franchisees’ claims for fraud, fraudulent inducement, negligent misrepresentation, unjust enrichment, and statutory violations, arguing that these claims were barred by the general releases, limitations, and the law of the case. The court’s analysis began with the franchisees’ argument that the agreements were illegal and unenforceable due to the franchisor’s failure to comply with disclosure requirements. […]

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Abstract In Rhode Island Truck Center, LLC v. Daimler Trucks North America, LLC, the U.S. District Court for the District of Rhode Island granted summary judgment in favor of Daimler, rejecting a franchised truck dealer’s claims of breach of contract and breach of the implied covenant of good faith and fair dealing. The dispute arose after Daimler authorized a new Freightliner dealership, Advantage Truck Group Raynham, within the plaintiff’s designated Area of Responsibility (AOR). The court found that the franchise agreement’s “Appointment Clause” unambiguously granted Daimler “sole discretion” to determine whether additional dealers were “warranted” in or near the plaintiff’s AOR. Because the clause was clear and the franchisee held only “nonexclusive” rights, Daimler’s decision to establish a new dealer—regardless of whether it conducted a market study or disclosed its reasoning—did not breach the agreement or the duty of good faith. Emphasizing that courts should not second-guess legitimate business decisions expressly reserved to franchisors, the court concluded that Daimler’s actions were consistent with the contract’s objectives and dismissed the dealer’s claims in their entirety. Facts and Background Rhode Island Truck Center, LLC v. Daimler Trucks North America, LLC involved a dispute between a long-standing Freightliner truck dealer and its franchisor, Daimler Trucks North America (“Daimler”), over Daimler’s decision to approve a new Freightliner dealership within the plaintiff’s market area. Rhode Island Truck Center (“RITC”) operated as an authorized Freightliner dealer under a Truck Sales and Service Agreement granting it a designated Area of Responsibility (AOR) in Rhode Island and southeastern […]

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Abstract: In BrightStar Franchising, LLC v. Foreside Management Co., No. 1:25-cv-08741 (N.D. Ill. Oct. 29, 2025), the court granted in part BrightStar’s motion for a preliminary injunction against a former franchisee. BrightStar sued Foreside Management and its principals, Mark and Claire Woodsum, for breaching post-termination obligations in their franchise agreements after they allowed their BrightStar Care franchises to expire and continued operating independently in the same territories. Judge Rowland held that Illinois law governed the contracts, rejecting defendants’ argument that California’s Business and Professions Code § 16600 barred enforcement of the non-compete and non-solicitation clauses. Relying on Ixchel Pharma v. Biogen, the court found franchise agreements are commercial, not employment, relationships subject to a “rule of reason,” and the restraints here were reasonable in scope and duration. The court concluded BrightStar showed a strong likelihood of success on its breach-of-contract claims, irreparable harm to its goodwill and confidential information, and that the balance of harms and public interest favored enforcement. Accordingly, the court enjoined defendants from competing with BrightStar, soliciting former clients, or using BrightStar’s marks and confidential information, but denied relief related to one office lease that was legally void. I. Factual Background BrightStar Franchising, LLC (“BrightStar”) is a national home-care franchisor that licenses franchisees to operate under its BrightStar Care system. Mark Woodsum, CEO of Foreside Management Company (“Foreside”), and his wife Claire operated BrightStar franchise agencies in Newport Beach and Mission Viejo, California under four franchise agreements entered in 2014–2015. Each agreement contained post-termination obligations, including 18-month […]

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