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A longstanding Steak 'n Shake franchise entity of five stores scored a victory on Friday when the 7th Circuit Court of Appeals affirmed an Illinois federal court decision. The ruling states that the franchisee does not have to comply with the franchisor's 2010 policy on setting the prices for menu items.
An Indianapolis Business Journal report said that the panel of judges issued a unanimous decision granting Stuller Inc. a preliminary injunction, to temporarily stop Steak ‘n Shake from taking action. The decision states:
The record contains sufficient evidence to find, as a threshold matter, that Stuller would suffer irreparable harm if it was forced to implement Steak n Shake’s pricing policy. Specifically, Stuller has presented evidence that the policy would be a significant change to its business model and that it would negatively affect its revenue, possibly even to a considerable extent.
Stuller sued when Steak ‘n Shake threatened to terminate its franchise contracts if it didn’t adopt the new policy of uniform prices and promotions. The article states:
It won the injunction while the court considers Stuller’s request for a declaratory judgment that it wasn’t required to comply with the policy. Stuller also accused Steak n Shake of breach of contract and violation of the Illinois Franchise Disclosure Act.
Stuller argued that in 2008, after the franchise stores adopted Steak ‘n Shake's pricing policy, it lost $538,446 due to the new pricing, and higher fuel and food costs.
The franchisor asserted that 48 franchised restaurants adopted the policy in 2009 and increased their sales and customer count. Steak ‘n Shake also maintained that no franchise went out of business because of the pricing policy.