Franchise Articles

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.

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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.

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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.

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Did your franchisor suddenly terminate your franchise agreement without giving you the required 30-day minimum written notice? Under the Franchise Rule, the franchisor is required to give a minimum of at least 30 days, in written form, before terminating a franchise agreement. Franchise lawyers can help you determine if the termination was unlawful. Protect yourself against an unlawful termination. 

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Federal Court Drives Final Nail in Dunkin’ Franchisee’s Coffin Dunkin Donuts Franchising, LLCv. Claudia I, LLC, and Claudia I, LLC v. Spring Hill Realty Inc., 2014 WL 5353724 (E.D. Pa., Oct. 20, 2014). After a long and litigious period, the United States District Court for the Eastern District of Pennsylvania granted Dunkin’ a permanent injunction against franchisee Claudia on October 20, 2014. This case is a prototypical example of what can happen when a franchisor loses trust, faith and patience with an underperforming franchisee. In this regard, it is important to note that the franchisee in this case also tightened the legal noose around its neck by unhelpfully focusing its attention and resources on relatively minor infractions of the franchisor and landlord rather than the most detrimental and objectionable franchisor conduct. This left Dunkin’ in the driver’s seat from the time of the execution of the franchise agreement through the final decision of the Court.

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This case shows that, as predicted last week, a mid-western jury answers to nobody, finding, in contrast to recent California courts, that franchisors can be subjected to serious vicarious liability for the conduct of their franchisees’ employees. In Bruntjen v. Bethalto Pizza, LLC, 2014 IL App (5th) 120245, 18 N.E.3d 215, 385 Ill.Dec. 215(2014) (decision follows below under comments), a passenger in a van that was struck by the car being driven by a pizza delivery driver brought an action against the driver, the driver’s employer (the franchisee), the franchisor of driver’s employer, and others for negligence. The Circuit Court of Illinois, Madison County, entered judgment in favor of the injured passenger for approximately $2.28 million. The appeal was rejected and the judgment affirmed.

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