Franchisor Retaliation Restrained: Bray v Quiznos

Court issues injunction against franchisor, saying its decision to terminate franchisee was "entirely impulsive”, “retaliatory” and “punitive” 

Editor's introduction: Quiznos became so upset at the head of an independent franchisee association for posting the grievances of a franchisee driven to suicide that it moved quickly to terminate the association's president, Chris Bray. The Bray versus QFA Royalties case has been deemed as one of the five most important lawsuits for franchisees in 2007. Franchisee attorneys Greg Stross and Justin Klein of Marks & Klein LLP helped stop the move. Klein represents single and multi-unit franchisees of many prominent franchises.

When you strip away the hyperbole, the rhetoric and the underlying facts of this case – the result fundamentally ensures that franchisees have a legitimate right to protect their investment when an aggressive franchisor seeks to take it away without good cause.  That is, franchisors do not have the unfettered right to do what they want simply because they think the contract says so.

This case hinged on the interpretation of the franchisor’s absolute power that it claimed it had under its form franchise agreement.  The decision ultimately lay in favor of the franchisees because of the franchisor’s failure to exercise any judgment in its decision to terminate several franchisees for conduct the franchisor determined to be offensive and in violation of the one-sided franchise agreement.  The Court aptly held that the franchisees will suffer irreparable harm if terminated and that an injunction was appropriate because the franchisors decision was “entirely impulsive”, “retaliatory” and “punitive”.  “Judgment”, in the Court’s words “is the result of the exercise of reason and thus differentiated from instinct, imagination or emotional impulse such that it is objectively trustworthy”.   The Court concluded that the Plaintiffs provided evidence, essentially conceded by the franchisor, demonstrating that the decision to terminate their franchises was made without any investigation or consideration to punish them for their affiliation with an independent franchisee association.

Franchisors cannot rule by absolute fiat.  The relationship is symbiotic and one that requires fairness and equity.

Score one for Franchisees and Independent Franchisee Associations.