Franchisor 101: A Tinted FDD A Tennessee federal district court granted a franchisee’s request for a preliminary injunction to prevent the franchisor from enforcing noncompete restrictions under the franchise agreement while the franchisee litigated its fraud claims against the franchisor. Frost Shades Franchising, LLC, the franchisor of a window tinting and frosting business, granted a franchise for the operation of a South Carolina location. Shortly after entering into the franchise agreement, the parties’ relationship broke down. The franchisee learned that some of the franchisor’s members ..read more

Franchisor 101: Getting Away With Tax (Franchisor) Evasion A Pennsylvania federal court refused to enforce non-competition and non-solicitation covenants in a franchise agreement of a nationwide tax preparation service franchisor. The court dismissed the franchisor’s request for injunctive relief to enforce those covenants. In 2015, Liberty Tax Service (Liberty) entered into a franchise agreement for the operation of a tax preparation business in Pennsylvania. Liberty terminated the franchise agreement in June 2020, claiming the franchisee breached the franchise agreement by failing to pay mon ..read more

Franchisor 101: Hunka, Hunka Confusion A federal district court in Florida denied a former moving and junk hauling franchisee’s motion to dismiss claims of trademark infringement and unfair competition by franchisor College Hunks Hauling Junk (“CHHJ”). In May 2021, franchisor and franchisee entered into a franchise agreement to open a CHHJ franchise in New Jersey. Franchisor alleges that franchisee breached the franchise agreement and were sent a notice of default with opportunity to cure followed by two notices of default and termination with opportunity to cure and finally a notice of termin ..read more

Franchisor 101: Court Holds Joint Liability is Fashionable A California federal district court held that judgment entered against individual owners of a franchisor entity, KEP Fortune, LLC, finding them jointly and severally liable with the franchisor entity, was not erroneous or a violation of due process rights. The franchise agreement was for a Klein Epstein & Parker clothing store in Las Vegas. After the parties’ relationship soured, the franchisee sent a notice that it was rescinding the franchise agreement. The franchisee then filed suit against KEP and its principals, Jeroen and Mi ..read more

Franchisor 101: Franchisor Cannot Massage its Way Out of Vicarious Liability A Texas court of appeals affirmed judgment in favor of a plaintiff who claimed a franchisor was vicariously liable for a franchisee’s employee’s wrongful conduct. Plaintiff, a customer of a massage salon franchised by Massage Heights Franchising, LLC (“MH Franchising”), alleged she was sexually assaulted by the franchisee’s employee, a massage therapist, during plaintiff’s massage. Plaintiff sued the employee, franchisee and MH Franchising asserting multiple claims, including negligence, premises liability and vicari ..read more

Franchisor 101: Liquidated Damages in 30 Minutes or Less A Michigan district court held a franchisee breached its obligations under its franchise agreements and upheld the liquidated damages clause in the agreements. Little Caesar Enterprises, Inc. (LCE) entered into franchise agreements for two franchise locations with franchisee, S&S. Pursuant to the franchise agreements, S&S was required to prepare and preserve accurate books and records for at least four years, provide weekly reports of gross sales and quarterly financial statements, and timely pay royalties and advertising fees ..read more

Franchisor 101: The Secret is Not in the Dough A Utah federal judge denied cookie franchisor Crumbl an injunction preventing its competitor, Dirty Dozen, from opening new locations while litigation between the two franchisors was pending. Crumbl alleged two brothers, Bradley and Bennett Maxwell, who are partial owners in Dirty Dozen, stole proprietary information from their previous affiliations with Crumbl. Bradley was a process engineer for Crumbl, and Bennett a potential Crumbl franchisee that was denied. Bradley was subject to two non-disclosure agreements and when his employment was termi ..read more

Franchisor 101: Not at Liberty to Change Venue A Dallas-based federal district court denied a franchisor’s request to keep its action against former franchisees in Texas and transferred the action to the Eastern District of Virginia. Plaintiff JTH Tax, LLC dba Liberty Tax Service (“Liberty”) is a nationwide tax preparation service. Liberty filed suit in Northern District of Texas against franchisees, who are all Houston residents located in the Southern District of Texas. Liberty alleged the franchisees violated the Defense Trade Secrets Act and breached their franchise agreements. The franchi ..read more

Franchisor 101: Salon Franchisor Weaved into Joint Employment Claims A Michigan federal district court denied a franchisor’s motion to dismiss claims under Title VII of the Civil Rights Act of 1964 and Michigan law, and claims alleging retaliatory termination and sexually hostile work environment at franchised locations. The claims alleged the franchisor was liable as a joint employer. Dy N Fly, a franchisor of hair coloring salons, was sued by employees of two franchisees. The employees alleged that Dy N Fly held significant integrated control over the franchise owner’s operations and actions ..read more

Franchisor 101: Pizza Franchisor’s Overcooked A federal district court denied a pizza franchisor’s motion to dismiss a former franchisee’s complaint, finding the former franchisee sufficiently pleaded the franchisor coerced the franchisee into signing a general release. The franchisee operated a Marco’s Pizza franchise under a franchise agreement with Marco’s Franchising, LLC. A few weeks prior to expiration of the franchise agreement’s 10-year term, Marco’s sent the franchisee a notice giving the franchisee six weeks to remedy deficiencies in system operating standards. The franchisee was req ..read more