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Cases, news, issues and legal opinions impacting franchise law

Court Overturns Franchisee’s $6.5M Jury Verdict Finding 'No Unfair Discrimination'

Although the Indiana Deceptive Franchise Practices Act prohibits franchisors from "discriminating unfairly among its franchisees" in relation to the franchise agreement, an appeals court did not find that in a case where the franchisee claimed its franchisor gave other dealerships more favorable pricing.

Multi-Brand Franchisee Resentenced to 5 Years in Prison, $5.5M in Restitution for Bank Fraud

The Department of Justice, U.S. Attorney Office for the Western District of Missouri, announced last week that a former owner of multiple franchised restaurants was resentenced for a more than $5.5 million bank fraud scheme, increasing his initial one-year, one-day sentence to five years without parole.

Belize High Court Finds Ex-Franchisor Executive Guilty of Defamation, Questions His Integrity

Belize Sanctuary
Photo: Sanctuary Belize Development

In a non-franchise litigation brought by Belizean property owners of a tropical development, the Belize Supreme Court found former franchisor executive Thomas Kevin Herskowitz guilty of defamation with malice.

Jreck Subs Former Franchisor Owner Imprisoned for 12 1/2 Years in Investor Fraud Scheme

A New York district judge last week sentenced Christopher M. Swartz, former owner of franchising firm Jreck Subs, to prison for 12 ½ years for defrauding investors and lenders in his company out of at least $9.5 million. Swartz was also ordered to pay restitution to his victims and the U.S. Internal Revenue Service in the amount of $26,660,590.18.

Instant Tax Service Franchisor Convicted of Conspiracy, Fraud, Other Related Crimes

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Department of Justice Tax Division announced June 5, 2017 that a federal jury convicted the owner of Instant Tax Service franchise in Dayton, Ohio of conspiracy to commit wire fraud, bank fraud, evasion of employment taxes and failure to pay employment taxes.

Fast-Casual Cosi Emerges from Bankruptcy

Fast-casual franchisor Cosi, Inc., which once traded on the NASDAQ public exchange, announced yesterday that it has emerged from bankruptcy proceedings as a private company.

Jury Awards Franchisees 80 Percent of Net Operating Losses; Curves Appeals

In a closely watched trial by many Curves fitness franchise owners across the country, a jury returned a unanimous verdict in favor of 52 qualifying franchisees, awarding them 80 percent of their net operating losses, totaling approximately $1.6 million. Curves International immediately vowed to appeal the decision.

NLRB Slaps Domino’s Franchisee for Making Workers Waive Rights on Class Arbitration

An NLRB administrative law judge issued a decision this month stating a Domino's franchisee entity violated the National Labor Relations Act in requiring employees as a condition of employment to agree to pursue legal disputes with the restaurant owners in binding arbitration on an individual basis, waiving their rights to pursue class and collective legal action.

McDonald’s Not Liable for State Labor Law Violations, No Control of Wages at Stores

McDonald's front counterA federal judge in northern California issued its decision earlier this month stating that franchisor McDonald's Corporation does not control the wages paid to workers at restaurants owned by franchisees and is not liable for violations of the state's labor laws.

New York AG Settles with Franchisees on Labor Violations, Domino’s Not Off the Hook

New York AG settles case against Domino's franchisees
AG Schneiderman on May 2016 announces lawsuit against Domino's wage theft

Attorney General Eric T. Schneiderman yesterday settled with three Domino's Pizza franchisees, totaling $480,000 in restitution to hundreds of workers subject to wage and labor violations at ten franchise locations. As part of the settlement, the shop owners will be dismissed from the lawsuit the AG filed last May, leaving Domino's as the only defendant.