Stopping Terminations
KFC stopped in its tracks. A long-term KFC franchisee in New Jersey received notice from the franchisor that its franchise was not going to be renewed unless it tore down its existing store, found a bigger location, and built a new and expensive unit. But real estate was prohibitively expensive and zoning laws made installation of a new unit difficult. In fact, the existing unit was doing well. The franchisee contacted the best franchise lawyers at Garner, Ginsburg & Johnsen, P.A. before the non-renewal date came. Michael prepared papers to stop the non-renewal under New Jersey’s Franchise Act and served them on KFC. The next day, the franchisor backed down. The franchise was renewed and the franchisee continued operating in the same location.
Terex heavy equipment termination halted. Our client, a dealer in Terex heavy equipment in Pennsylvania, with operations in several other states, was faced with a termination notice from Terex that threatened the entire business. We prepared and filed papers for a temporary restraining order and preliminary injunction. The supplier, Terex, brought in a battalion of lawyers; the court held a two-day trial that culminated in the cross-examination of Terex’s executives. Result: the termination was enjoined and the business was saved.
Lund Boats’ plans to terminate get sunk. Our client, one of Iowa’s largest dealers in Lund Boats, got a surprise visit from the company: a hand-delivered notice of nonrenewal that said the dealership was ending on 30 days’ notice. We looked at the law carefully and concluded that Lund was a franchisor under Iowa and Minnesota law and that those laws prohibited Lund from attempting to terminate without good cause, prior notice and an opportunity to cure. After filing papers to stop the termination and engaging in intense documentary discovery and depositions, Lund backed down and allowed our client to continue as a dealer.
Life after dark. Our client, a real estate franchisee, was terminated for failing to pay fees. It turned out, however, that the fees were incorrectly charged. After engaging in negotiations with the franchisor, we were able to get the franchisee fully reinstated.
Uncovering Fraud And Recovering Damages
The great marble escapade. Union Carbide Corporation, which at the time was the nation’s seventh largest corporation, decided to go into franchising the business of cleaning, caring for and polishing marble. The concept seemed perfect – as a leading chemical company, it would supply products specially developed by it and protected as trade secrets to the franchisees who would then use Carbide’s proprietary systems and techniques to keep the gleam on the marble lobbies and hallways of America’s hotels and office buildings. After investing hundreds of thousands of dollars, our clients discovered that Carbide had purchased both the chemicals and the system “off the shelf” from other suppliers. We filed a complaint in Supreme Court, New York, complaining that Carbide had duped our clients, in violation of the New York Franchise Sales Act. Carbide moved to dismiss the case, and in a landmark decision, the court upheld our complaint. After taking the case to New York’s highest court, Carbide settled with our clients. We can’t tell you the terms of that settlement, but we can say that our clients were smiling.
The hair removal fiasco. Laser hair removal – the use of specialized lasers to take away unwanted hair on legs, underarms and other parts of the body – was the thing in the early 00s. One company, Sona Laser Centers, sold franchises for laser hair removal by claiming its methods and products worked on all kinds of hair and would remove over 90 percent of someone’s unwanted hair in just five treatments. The only problem? It wasn’t true, and our clients, who bought the franchises, didn’t find out that the Sona methods didn’t work until they’d spent hundreds of thousands of dollars, had administered the five treatments on their patients, and the hair was still there! We took Sona and its owners to arbitration, and after a two-week trial, won a substantial six-figure verdict that, in turn, led to settlements with other franchisees.
The software that didn’t exist. Our clients thought that they had it cinched. They’d purchased two territories for Mr. Sign, a sign-making franchise that featured special software that could drive the machinery to cut signs in any shape, size, font or design! What’s more, “Mr. Sign” had name recognition and was backed by a wealthy Wall Street investor. But when our clients went to open their franchise, they discovered that the “software” was no more than a couple of notebooks with cryptic drawings and notations; our investigation found that the franchisor and its “investor” had been defendants in a number of undisclosed lawsuits; and that there were in fact seven other companies claiming rights in the “Mr. Sign” name. After a lengthy battle, the franchisor and investor settled, and our clients were made whole.
Stopping Franchisors From Encroaching
Halting the invasion of the Internet. Our clients, franchisees of the Weight Watchers system, had helped their customers lose weight for years through in-person coaching at their weight loss centers. With the advent of the Internet, the franchisor launched an online program that threatened to reverse decades of proven techniques, to steal our clients’ customers and to devalue their businesses. We filed a lawsuit to stop the Internet launch. The franchisor came to the bargaining table, and we struck a deal that protected our clients’ rights.
“Special” locations. Our client, a Wendy’s franchisee, had exclusive rights to New York City – or so it thought. Contained in the franchise agreement was an exception for “special locations” that included sports stadiums, hospitals and “malls.” The franchisor announced plans to put a company-owned store in an underground subway concourse, claiming that it was a “mall.” We brought suit to stop the restaurant from opening, and Wendy’s settled.
Getting Out Of The System
Better than getting even. Our clients, area developers for a major franchisor in the consulting business, came to us to explain how they had been defrauded: the franchisor had promised, among other things, a national support network that would feed them information to be used in their consulting business. But in fact – there was nothing there! What’s more, the franchisor and its principals were under investigation by the government! We wrote a very stiff letter to the franchisor. A meeting followed, and within weeks, we were drawing up the papers to get our clients out of the system and to award them a seven-figure sum. We can’t tell you who the franchisor was – it insisted, as a term of settlement, that its identity not be revealed!
Breaking away. Our client, a franchisee of a carpet outlet, broke away from the franchisor and set up his own business. The franchisor sued, and tried to get a court order directing the franchisee to turn over its lease to the franchisor in order to preserve its goodwill. The court held that the franchisee, in fact, owned the goodwill and that the franchisor was not entitled to relief and that our client could continue.
Negotiating Renewal Agreements
Improving the deal. Our clients, a group of franchisees from around the country, were coming up for renewal. The franchisor’s new agreement would have imposed many costly requirements on our clients. Using various sources of leverage, we were able to drastically improve the new agreements and reduce the costs and requirements imposed on our clients.
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