ABSTRACT

In PJC Management Group, LLC v. MAACO Franchisor SPV LLC, 2026 NCBC 37 (N.C. Super. Ct. Apr. 22, 2026), the North Carolina Business Court partially granted and partially denied a motion to dismiss filed by MAACO and its parent companies in a franchise dispute. The court allowed franchisees’ breach of contract claims against MAACO to proceed based on allegations that MAACO misappropriated advertising fees and failed to provide required financial statements. However, the court dismissed claims against MAACO’s parent companies for insufficient pleading, dismissed the unfair trade practices claim with prejudice for failing to allege aggravating circumstances beyond breach of contract, and dismissed the accounting claim without prejudice as it is a remedy rather than an independent cause of action. The decision clarifies the standards for pleading franchise disputes in North Carolina and the limitations on converting contract breaches into statutory violations.

CASE IDENTIFICATION AND PARTIES

This case is PJC Management Group, LLC v. MAACO Franchisor SPV LLC, 2026 NCBC 37, decided by the North Carolina Superior Court, Mecklenburg County, Business Court on April 22, 2026. The plaintiffs and franchisees are PJC Management Group, LLC (a North Carolina limited liability company), Phillip J. Collins, J&A Companies Inc. (a Nevada corporation), PVA Capital LLC (a Virginia limited liability company), Shore Capital, LLC (a Virginia limited liability company), LEWVIA Inc. (a Texas corporation), Hollas Enterprises, LLC (a Texas limited liability company), MFinch & WPerry Solutions, Inc. (a Georgia corporation), William Perry, and Michael Finch. The defendants include MAACO Franchisor SPV LLC (the franchisor, a Delaware limited liability company formerly known as MAACO Franchising, LLC and MAACO Franchising, Inc.), Driven Brands Inc., and Driven Systems LLC (MAACO’s direct and indirect parent companies). Special Superior Court Judge Adam M. Conrad issued the opinion.

FACTUAL BACKGROUND

MAACO Franchisor SPV LLC operated as the franchisor of a chain of vehicle painting and auto body repair businesses. Driven Systems LLC and Driven Brands, Inc. served as MAACO’s direct and indirect parent companies. The plaintiffs operated as franchisees of MAACO, collectively owning and operating nearly fifty franchises across multiple states including the Carolinas, Georgia, Texas, California, and other locations. The parties entered into dozens of substantially similar franchise agreements, essentially one for each franchise location. Under these franchise agreements, the franchisees were required to pay MAACO weekly marketing fees that MAACO was supposed to use for nationwide advertising and other marketing efforts, which could include not only the costs of advertisements but also the costs of developing and administering marketing programs.

The stated goal of these marketing expenditures was to maximize general public recognition and patronage of the MAACO brand in the manner determined to be most effective by MAACO. To ensure accountability, MAACO was contractually obligated to provide an annual statement of receipts and disbursements with respect to marketing fees when requested by a franchisee. MAACO’s franchise disclosures included guarantees by Driven Systems and Driven Brands, in which each company absolutely and unconditionally guaranteed to assume the duties and obligations of MAACO under the franchise agreements.

Each guarantee continued until all such obligations of MAACO were satisfied or until the liability of MAACO to its franchisees under the franchise agreements had been completely discharged, whichever occurred first. Administration of the advertising fund became a source of friction between MAACO and its franchisees beginning around 2020. Around that time, MAACO allegedly scaled back its television advertising, shuttered its in-house advertising agency in favor of using independent agencies, and raised administrative fees while cutting marketing expenditures.

These changes did not sit well with the franchisees, who began complaining of a sharp downturn in customer business. When the franchisees and other MAACO franchisees demanded an accounting of receipts and disbursements, MAACO balked and refused to provide the requested information. By 2024, a group of franchisees became so displeased with what they perceived as MAACO’s stonewalling that they formed an association to coordinate their communications with the franchisor.

Through counsel, the association accused MAACO of a lack of transparency and lamented the climate of distrust that had ensued. In mid-2025, MAACO responded by providing a massive spreadsheet to the franchisees. Although the complaint did not detail the spreadsheet’s specific contents, the franchisees alleged that the spreadsheet raised more questions than it answered and failed to address the fundamental question of where the franchisees’ advertising dollars went.

The franchisees sought further explanation, specifically asking about anomalous transactions appearing in the spreadsheet as well as unexplained spikes in administrative fees. MAACO did not respond to this inquiry. As this dispute over the advertising fund was coming to a head, the franchisees began to question certain charges that MAACO had assessed against them. According to the franchisees, many charges were unsubstantiated, and MAACO acknowledged accounting errors stemming from its transition to a new software system. The franchisees came to believe that MAACO was withholding data about its advertising programs because it had been misusing its franchisees’ weekly fees for purposes unrelated to advertising and marketing programs.

PROCEDURAL POSTURE AND HOLDINGS

The franchisees filed a complaint asserting claims against MAACO for breach of the franchise agreements, breach of the implied covenant of good faith and fair dealing, accounting, unfair or deceptive trade practices under N.C.G.S. § 75-1.1, and declaratory judgment. The franchisees also claimed that Driven Systems and Driven Brands, having guaranteed MAACO’s performance, were jointly liable for any breach of the franchise agreements. MAACO, Driven Systems, and Driven Brands moved to dismiss all claims against them under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. The motion was fully briefed, and the court held a hearing on April 1, 2026, with all parties represented by counsel.

The court granted in part and denied in part the defendants’ motion to dismiss. Specifically, the court denied the motion to dismiss the claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory judgment to the extent they were asserted against MAACO. The court granted the motion to dismiss these same claims to the extent they were asserted against Driven Brands and Driven Systems, dismissing them without prejudice. The court granted the motion to dismiss the section 75-1.1 claim with prejudice. The court also granted the motion to dismiss the accounting claim without prejudice to the franchisees’ right to seek an accounting as a remedy at a later stage.

PARTIES’ POSITIONS ON THE ISSUES

MAACO conceded that the franchise agreements were valid but disputed whether the complaint’s allegations, if true, established a breach of contract. MAACO argued that all that was alleged was that it made an unpopular decision to switch from an in-house advertising agency to an independent agency, which increased administration costs and reduced the amount spent directly on advertisements placed on television, radio, and other media. MAACO insisted that this decision was a legitimate exercise of its broad discretion to administer advertising and marketing programs under the franchise agreements. On that basis, MAACO contended that the claim for breach of contract must be dismissed.

MAACO further argued that the claims for breach of the implied covenant and for declaratory judgment must be dismissed as well because they were bound up with the claim for breach of contract. MAACO objected that the allegation of misappropriation was a conclusory, unreasonable inference, alleged only upon information and belief. Regarding the section 75-1.1 claim, MAACO argued that the complaint did not adequately allege the sort of aggravating circumstances needed to convert an ordinary breach of contract into a violation of section 75-1.1. The franchisees, in contrast, argued that their complaint was not simply about MAACO making bad decisions about how to administer its marketing programs and allocate funds among different types of media.

Rather, the franchisees alleged that MAACO had misappropriated a portion of the collected fees, putting the money toward impermissible uses that had nothing at all to do with advertising or marketing more broadly. The franchisees alleged that MAACO had siphoned funds from the advertising funds and marketing fees paid by the franchisees for the improper purpose of cutting administrative and overhead costs or to pay for other expenses unrelated to and not benefiting the MAACO franchise system. The franchisees contended they had alleged ample factual support for their belief that MAACO had misused funds.

FRANCHISE AGREEMENT PROVISIONS IN DISPUTE

The franchise agreements at issue contained provisions in Section 6.1(B) governing weekly marketing fees and annual financial statements. Under these agreements, the franchisees were required to pay MAACO weekly marketing fees.

MAACO was obligated to use these fees for nationwide advertising and other marketing efforts, which could include not only the costs of advertisements but also the costs of developing and administering marketing programs. The stated purpose was to maximize general public recognition and patronage of the MAACO brand in the manner determined to be most effective by MAACO. To ensure accountability, the franchise agreements required MAACO to provide an annual statement of receipts and disbursements with respect to marketing fees when requested by a franchisee.

The franchise disclosures also included guarantees by Driven Systems and Driven Brands, in which each company absolutely and unconditionally guaranteed to assume the duties and obligations of MAACO under the franchise agreements. Each guarantee was to continue until all such obligations of MAACO were satisfied or until the liability of MAACO to its franchisees under the franchise agreements had been completely discharged, whichever first occurred.

COURT’S ANALYSIS OF BREACH OF CONTRACT CLAIMS AGAINST MAACO

The court applied the standard for a Rule 12(b)(6) motion to dismiss, which tests the legal sufficiency of the complaint. The motion should be granted only when the complaint on its face reveals that no law supports the plaintiff’s claim, the complaint on its face reveals the absence of facts sufficient to make a good claim, or the complaint discloses some fact that necessarily defeats the plaintiff’s claim. In deciding the motion, the court treated all well-pleaded allegations as true and viewed the facts and permissible inferences in the light most favorable to the nonmoving party. The court noted that the elements of a claim for breach of contract are the existence of a valid contract and a breach of that contract’s terms. When these elements are alleged, it is error to dismiss a breach of contract claim under Rule 12(b)(6), and stating a claim for breach of contract is a relatively low bar.

The court found that MAACO construed the complaint’s allegations too narrowly. The court determined that the franchisees’ complaint was not simply that MAACO made bad decisions about how to administer its marketing programs and allocate funds among different types of media. Rather, the franchisees alleged that MAACO had misappropriated a portion of the collected fees, putting the money toward impermissible uses that had nothing at all to do with advertising or marketing more broadly.

The court disagreed with MAACO’s objection that this was a conclusory, unreasonable inference alleged only upon information and belief. The court noted that North Carolina remains a notice pleading jurisdiction, and the Supreme Court has long held that a plaintiff may allege facts based on actual knowledge or upon information and belief. The court found that the franchisees had alleged ample factual support for their belief that MAACO had misused funds. Viewed in the light most favorable to the franchisees, the allegations showed that MAACO

• radically reduced expenditures on advertisements,
• refused for several years to provide contractually required statements of advertising-related receipts and disbursements,
• eventually produced data that revealed anomalous transactions without clarifying how fees collected from franchisees were spent,
• refused to explain the anomalies, and
• assessed spurious charges against franchisees through a faulty accounting system.

Together, these allegations supported a reasonable inference that MAACO misused advertising fees collected from its franchisees. Moreover, MAACO did not contest the adequacy of the allegation that it failed to provide annual statements of receipts and disbursements, as required by the franchise agreements. This allegation, taken as true, independently supported the claim for breach of contract. The court therefore denied the motion to dismiss the claim for breach of contract against MAACO. Because MAACO offered no independent grounds to dismiss the claims for breach of the implied covenant and for declaratory judgment, these claims survived as well.

COURT’S REASONING FOR DENYING MAACO’S MOTION ON CONTRACT CLAIMS

The court accepted the franchisees’ position over MAACO’s because MAACO construed the allegations too narrowly by focusing only on the decision to switch advertising agencies rather than the broader allegation of misappropriation of funds. The court emphasized that under North Carolina’s notice pleading standard, the franchisees were permitted to allege facts upon information and belief, and they had provided sufficient factual support for their allegations. The court found persuasive the franchisees’ detailed allegations showing a pattern of conduct by MAACO that supported a reasonable inference of misuse of advertising fees. The court specifically noted that the franchisees alleged MAACO radically reduced advertising expenditures, refused to provide required financial statements for several years, produced inadequate data with anomalous transactions, refused to explain the anomalies, and assessed spurious charges through a faulty accounting system.

These allegations, taken together, were sufficient to support a claim for breach of contract at the pleading stage. The court also found significant that MAACO did not contest the adequacy of the allegation that it failed to provide annual statements of receipts and disbursements as required by the franchise agreements. This failure alone constituted an independent basis for the breach of contract claim.

The court rejected MAACO’s argument that its decisions were merely exercises of broad discretion under the franchise agreements because the franchisees alleged not just poor business decisions but actual misappropriation of funds for purposes unrelated to advertising and marketing. The court determined that these allegations went beyond challenging MAACO’s discretionary decisions and instead challenged whether MAACO used the fees for their contractually required purposes.

COURT’S ANALYSIS OF CLAIMS AGAINST DRIVEN BRANDS AND DRIVEN SYSTEMS

The court found that the franchisees had not adequately stated a claim against Driven Brands and Driven Systems. The complaint said next to nothing about these two defendants, alleging only that they guaranteed MAACO’s contractual duties and obligations and therefore must be jointly liable for MAACO’s breaches of the franchise agreements. The court determined that such threadbare allegations were insufficient even under a simple notice-pleading standard. The court noted that there was so little in the complaint that the nature of the claim against Driven Brands and Driven Systems was unclear. The complaint did not state, for example, that either company breached its guaranty. As best the court could tell, the franchisees’ theory was that Driven Brands’ and Driven Systems’ guarantees would apply to a monetary judgment if one was entered against MAACO.

The court found that this theory, if it was what the franchisees intended, was not ripe because there was no judgment yet and the pleadings had not even closed. Given the vague, conclusory quality of the allegations, the court dismissed without prejudice the contract-related claims to the extent they were asserted against Driven Brands and Driven Systems. The court cited precedent for dismissing claims when the plaintiff did not allege that certain defendants committed any wrongful acts and for dismissing claims due to threadbare allegations.

COURT’S REASONING FOR DISMISSING CLAIMS AGAINST PARENT COMPANIES

The court accepted the defendants’ position that the claims against Driven Brands and Driven Systems should be dismissed because the franchisees failed to provide sufficient factual allegations about what these companies did wrong. The court emphasized that even under North Carolina’s notice pleading standard, plaintiffs must provide more than conclusory allegations that defendants are liable. The court found that simply alleging that the parent companies guaranteed MAACO’s obligations was insufficient to state a claim without alleging how those companies breached their guarantees or what specific actions they took.

The court distinguished this from the claims against MAACO, where the franchisees provided detailed factual allegations about specific conduct. The court rejected any theory that the parent companies could be held liable at this stage merely because they guaranteed MAACO’s performance, finding such a claim premature before any judgment had been entered against MAACO. The court determined that the franchisees needed to allege specific wrongful acts by Driven Brands and Driven Systems or wait until after a judgment was entered against MAACO to pursue the guarantors. The dismissal without prejudice allowed the franchisees the opportunity to replead with more specific allegations if they could do so in good faith.

COURT’S ANALYSIS OF SECTION 75-1.1 UNFAIR TRADE PRACTICES CLAIM

The court applied the legal standard that unfair or deceptive acts or practices in or affecting commerce are unlawful under N.C.G.S. § 75-1.1, but this language is not intended to apply to all wrongs in a business setting. The court noted that North Carolina appellate courts have stressed that a mere breach of contract, even if intentional, is not sufficiently unfair or deceptive to sustain an action under section 75-1.1. To state a claim, the plaintiff must also allege substantial aggravating circumstances attending the breach.

The court observed that with rare exception, a violation of section 75-1.1 is unlikely to occur during the course of contractual performance. One reason for this is that disputes concerning the circumstances of the breach are often bound up with one party’s exercise of perceived rights and remedies under the contract.

The court found that North Carolina courts have held that a party’s threats to terminate, efforts to encourage another to continue contractual performance while planning to breach, and refusal to otherwise meet contractual obligations do not rise to the level of aggravating circumstances. The court agreed with MAACO that the complaint did not adequately allege the sort of aggravating circumstances needed to convert an ordinary breach of contract into a violation of section 75-1.1. The only aggravating circumstance alleged was MAACO’s failure to provide annual statements of receipts and disbursements for its advertising programs.

However, the court noted that an express provision of the franchise agreements governed these annual statements. Even if MAACO withheld information that it was contractually required to provide, that would be, at most, an intentional breach of the agreements, not an aggravating circumstance.

The court found that at no point did the complaint allege that MAACO destroyed information, provided false or misleading information, or took any other affirmative, deceptive action to deter the franchisees’ investigation. Any dispute about the sufficiency of MAACO’s disclosures to its franchisees was simply a dispute about the parties’ contractual rights and obligations. Accordingly, the court granted the motion to dismiss the section 75-1.1 claim and dismissed this claim with prejudice.

COURT’S REASONING FOR DISMISSING UNFAIR TRADE PRACTICES CLAIM

The court accepted MAACO’s position that the unfair trade practices claim should be dismissed because the franchisees failed to allege aggravating circumstances beyond the breach of contract itself. The court emphasized that North Carolina law requires more than an intentional breach of contract to support a section 75-1.1 claim. The court found that the franchisees’ allegations centered on MAACO’s failure to provide contractually required financial statements, which was governed by an express provision of the franchise agreements. The court determined that even an intentional failure to provide this information constituted merely a breach of the contract, not an aggravating circumstance sufficient to support a statutory claim.

The court rejected the franchisees’ position because they did not allege that MAACO engaged in affirmative deceptive conduct such as destroying information, providing false or misleading information, or taking other actions to deter investigation beyond simply withholding information. The court distinguished between actively deceiving someone and passively failing to provide information required by contract. The court found that disputes about the sufficiency of disclosures and the interpretation of contractual obligations do not rise to the level of unfair or deceptive trade practices. The court cited precedent holding that allegations showing a defendant failed to disclose its breach are not sufficiently deceptive or egregious to support liability under section 75-1.1, and that disputes over interpretation and performance of contract provisions do not constitute unfair trade practices.

COURT’S ANALYSIS OF ACCOUNTING CLAIM

The court applied the legal standard that an equitable accounting may be available when a plaintiff has asserted a valid claim for relief in equity and an accounting is necessary to compel discovery of information regarding accounts held exclusively by the defendant. However, the court noted that accounting is a remedy, not an independent cause of action, and is available only if the plaintiff first shows that he lacks an adequate remedy at law and alleges facts in the complaint to that effect. The court therefore granted without prejudice the motion to dismiss the accounting claim to the extent that it was pleaded as an independent cause of action. The court indicated that whether the franchisees may be entitled to an accounting as a remedy is a question better addressed at a later stage of the proceedings.

POTENTIAL SIGNIFICANCE FOR FRANCHISEES AND FRANCHISORS

This decision may have significant implications for both franchisees and franchisors in North Carolina and potentially in other jurisdictions. For franchisees, the decision may demonstrate that courts will allow breach of contract claims to proceed when franchisees allege specific facts supporting an inference that the franchisor misappropriated funds or failed to comply with contractual obligations, even when those allegations are based on information and belief. The decision may suggest that franchisees can survive a motion to dismiss by alleging a pattern of conduct suggesting misuse of funds, including reduced expenditures, refusal to provide required financial statements, production of inadequate data, and unexplained charges. This may provide franchisees with a roadmap for pleading claims when they suspect financial impropriety but lack complete information due to the franchisor’s control over financial records.

However, the decision may also establish important limitations for franchisees. The dismissal of the unfair trade practices claim with prejudice could show that franchisees cannot convert ordinary contract disputes into statutory claims without alleging affirmative deceptive conduct beyond mere failure to perform contractual obligations. Franchisees may allege that the franchisor destroyed information, provided false information, or took other affirmative steps to deceive, rather than simply withholding information. This makes it more difficult for franchisees to pursue enhanced remedies available under unfair trade practices statutes.

Additionally, the dismissal of claims against parent companies may show that franchisees must plead specific facts about what guarantors did wrong, not simply rely on the existence of a guarantee. For franchisors, the decision may serve as a warning that courts will scrutinize allegations of fund misappropriation and failure to provide required financial statements. Franchisors may take care to ensure they comply with contractual obligations to provide annual statements of receipts and disbursements, as failure to do so can independently support a breach of contract claim. Franchisors may also take care to be prepared to explain changes in advertising strategies and expenditures to franchisees, as patterns of reduced spending combined with refusal to provide information can support an inference of misappropriation. The decision may also provide some protection to franchisors by limiting when contract disputes can become statutory claims, but franchisors should avoid any affirmative deceptive conduct that could cross that line.

COMPARISON TO CASES IN OTHER JURISDICTIONS

This decision may reflect approaches taken by courts in other jurisdictions when addressing franchise disputes involving advertising funds and financial transparency. Many jurisdictions recognize that franchisees have limited access to information about how franchisors use advertising funds, and courts generally allow claims to proceed when franchisees allege specific facts suggesting misuse of funds even without complete information. The North Carolina Business Court’s application of notice pleading principles and acceptance of allegations based on information and belief aligns with approaches in other states that do not require franchisees to prove their case at the pleading stage.

However, the specific standard for what constitutes sufficient allegations may vary by jurisdiction. The court’s treatment of the unfair trade practices claim could be consistent with approaches in many jurisdictions that require aggravating circumstances beyond mere breach of contract to support statutory claims. However, some jurisdictions may be more or less stringent in what constitutes sufficient aggravating circumstances. Some states might find that systematic withholding of required financial information combined with alleged misappropriation constitutes sufficient deceptive conduct, while others would require more affirmative acts of deception.

The North Carolina court’s emphasis that disputes about contractual rights and obligations may not constitute unfair trade practices reflects a common approach, but the specific application can vary. The dismissal of claims against parent company guarantors for insufficient pleading reflects standards applied in many jurisdictions requiring specific allegations of wrongdoing rather than conclusory allegations of liability. However, some jurisdictions might allow claims against guarantors to proceed further based on the existence of the guarantee itself, particularly if the guarantee language is broad. The court’s finding that claims against guarantors may be premature before a judgment against the primary obligor reflects one approach, but other jurisdictions might allow such claims to proceed in parallel. Overall, this decision appears to be generally consistent with mainstream approaches to franchise disputes, though specific outcomes can vary based on each jurisdiction’s pleading standards and substantive law.

LAW AND ECONOMICS PERSPECTIVE

From a law and economics perspective, this decision addresses important agency problems and information asymmetries inherent in franchise relationships. Franchisees contribute to advertising funds controlled by the franchisor, creating a principal-agent problem where the franchisor may have incentives to use funds in ways that benefit the franchisor rather than maximizing the collective benefit to franchisees. The contractual requirement for annual financial statements serves as a monitoring mechanism to reduce this agency problem, and the court’s recognition that failure to provide these statements constitutes a breach of contract reinforces the importance of such monitoring mechanisms.

The decision’s allowance of claims based on information and belief appears to recognize the severe information asymmetry between franchisors and franchisees regarding use of pooled advertising funds. By permitting claims to proceed based on circumstantial evidence of misappropriation, the court reduces the information costs franchisees would otherwise face in detecting and proving misuse of funds.

However, the dismissal of the unfair trade practices claim may reflect economic efficiency concerns about over-deterrence and excessive litigation costs. Allowing every contract dispute to become a statutory claim with enhanced remedies could lead to excessive litigation and defensive behavior by franchisors that might not be economically efficient. The court’s approach balances the need to deter opportunistic behavior by franchisors against the costs of excessive legal intervention in contractual relationships.