Minneapolis franchisee lawyer Ron Gardner explains when a franchisee has a claim for discrimination after receiving a letter of default.
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Lots of people call us and they say you know, my franchisor has accused me of a default. He says I didn’t pay on time, I was three days late or I’ve got a piece of chipped tile in my lobby or my parking lot is cracked, whatever it might be. But I know that the guy down the street, I talk to him all the time, I’ve been in his store, he’s got more chipped tile than I do and he’s not getting the default letter. I’m being discriminated against. A lot of our initial conversations with our clients start that way. Unfortunately, for most franchisees, not all, but for most franchisees there is a tenet in franchise law, it came in a case in the great American cookie system where a franchisee was making this exact same argument and the judge said, it is no defense to a speeding ticket that guy next to you was also speeding. And there are many judges who sort of adopt that view. Look, you’re in an individual contractual relationship, so that’s guy, if they decide they want to let him slide it doesn’t mean you can.
Now that concept gets juxtaposed against the concept that we use all the time the covenant of good faith and fair dealing. If someone is clearly letting everybody in the system do something, it’s not a one off or there’s not one or two other people that are getting away with it but everybody’s getting away with it or doing it, the franchisor is likely acting in bad faith if they’re picking you out for doing something that has become protocol for everybody else in the system. And so, you may have a claim for discrimination. You may have a claim for violation of the covenant of good faith and fair dealing. It’s really going to depend on the level of acceptance that the franchisor has exhibited in accepting that conduct throughout the system on whether or not you have a claim. So we need to look a little bit more carefully before we can answer that question.