When does a franchisor seek injunctive relief in court against a franchisee?
Washington D.C. litigator Eric Yaffe explains how to pursue injunctive relief against a franchisee.
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When a franchisor is seeking injunctive relief, it’s because the franchisor is really concerned about usually the franchisee remaining in the system in the circumstances of the case. So, for example, a franchisor might seek an immediate injunction when the franchisee hasn’t been paying the franchisor for a long period of time, yet the franchisee continues to use the franchisor’s marks, its operating system, its trademarks, its trade dress, and wants to continue in the system. Obviously that’s very unfair, first, and secondly consumers could be confused that this franchisee is really part of the system when perhaps that franchisee has now been terminated, yet wants to continue to use the franchisor’s marks. So in that instance a franchisor will often try to bring immediate injunctive relief and get the court to essentially enforce the termination and get the franchisee out of the system.
Similarly, you could have a situation where there’s the use of unapproved products by the franchisee. In the food industry there’s a set of standards that franchisors always want to impose on the franchisees to make sure there’s uniformity of the product and the quality of that product, and if a franchisee starts using other products it’s no longer a true franchise system. The consumers can be confused, and if it’s food it might actually taste different. So the franchisor really wants to ensure that potentially that franchisee needs to either get out of the system or stop using that product immediately, and will seek injunctive relief.
I would say, finally, a third area where we see injunctions quite frequently is in the context of covenants not to compete. So those are instances where let’s say it’s a burger chain, and the franchisor has taught the individual, the franchisee, its system, its method of operations, how to run a burger establishment, and yet the next day they go and open up a competing location a mile away. Well, that’s obviously unfair and it can also take business away from the franchisor, and the parties have really agreed that that won’t happen, usually in term as well as after the franchise relationship has ended for some short period of time. If that’s done, the franchisor will often go in and seek injunctive relief.