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Domino’s Swiftly Settles Lawsuit with Multi-Unit Franchisee over Obstructing Sale of Stores

Domino's Pizza Inc. (DPZ) settled a lawsuit on April 3, 2018 with a multi-unit franchisee, with 31 years in the system, over allegations that the franchisor obstructed his every move in selling his two award-winning stores to a well-qualified Domino's franchisee. Unexpectedly, Domino's did not disclose the litigation, required by law, in its April 2018 FDD.

The court had granted Domino's requests for two extensions in responding to the lawsuit.

According to PACER electronic public documents, Robert "Bob" Huth filed his lawsuit, Holiday Delta, Inc. v. Domino's Pizza Franchising, LLC. on December 29, 2017, in federal court of North Carolina, Eastern Division. Huth was a seasoned multi-unit franchisee who had been in the Domino's system, in good standing, for over three decades. The core of the litigation surrounds the two stores he owned in Camp Lejeune Marine Base, and he alleged Domino's was the one that pressured him to sell.

The legal complaint gives the background to the litigation. It states that Robert "Bob" Huth signed a franchise agreement for a 10-year term with Domino's Pizza on December 15, 2003 for a store (#8926) located at Camp Lejeune Marine Base in North Carolina. The 10-year renewal agreement was signed by the parties on December 28, 2013, to be interpreted in accordance with North Carolina laws.

Then, on February 26, 2008, he entered into another franchise agreement with Domino's for another store (8823) also at Camp Lejeune, again for a 10-year period, and with a renewal date on February 26, 2018 for another 10-year period, signing a new Domino's Pizza Franchising, LLC standard franchise agreement with Holiday Delta, Inc., labeled renewal agreement 8823.

The lawsuit states that in 2013 Domino's presented franchisee Bob Huth with an award for his first store 8926 "for being among the Top Ten National Stores having the highest sales during Award Year 2013." That franchise store had consistently ranked as the number one store in Domino's United States system since 2004 and ranked consistently in the top five worldwide and has consistently remained first in sales according to "Carpenter's Area Store Ranking."

Then on November 16, 2017, Domino's and Saint Jude's awarded Huth's second store, 8823, also located in Camp Lejeune for "Top Daily Fundraiser" from St. Jude's Thanksgiving Campaign.

But court documents state that Domino's leadership team then "expressed a strong desire" that Huth leave the system. The complaint states that Huth, operating his business under Holiday Delta, Inc., states he was then informed and he believes, and thereon alleges that his franchise consistently operated as a "B" operator in Domino's "ABF" Grading System, based on Domino's grading criteria."

On December 24, 2017, Bob Huth sent an email to Patrick Doyle, president, chief executive officer and director for Domino's Pizza Franchising, and Russell Weiner, president of Domino's U.S.A, and Kim Ridge, area vice president of Domino's, summarizing the events that took place over the past three and a half years, "imploring" Domino's to do the right thing and allow the sale of his two store in Camp Lejeune Marine Base.

To date, it has been more than  31/2years that Domino's has required me to exit the system. I attempted, per Domino's instructions, to sell my remaining two Camp Lejeune stores to Robert Taylor, Jim Stansik, Salim Joarder, Alan Murph, and a number of high quality franchisees in good standing. None of these deals were acted upon by Domino's for approval and all were rejected by Domino's through its inaction or outright rejection. In addition, in February 2017, I provided yet another qualified offer to purchase and/or LOI [Letter of Intent] from a franchisee in goodstanding, Peter D'Andrea. I have tried for the better part of 2017 to convince Domino's to allow Pete D'Andrea to buy the stores, but Domino's again has decided to reject. Since my stores are not in default, and I have complied with the criteria set forth by Domino's (i.e., the stores will be able to cash flow themselves), I see no reason not to allow the deal with Peter to finalize. I have been getting the "run around" from Domino's for almost 2 years for this sale. When Robert Taylor was approved to buy my 19 stores in Wilmington, his OER [Operations Evaluation Report] scores were 2.6 star average (lower than Peter's currently), so the 3 star threshold is a red herring. The stores on Camp Lejeune meet the Domino's requirement to sell. I want Peter to be approved. Peter should be provided the same OER [Operations Evaluation Report] consideration as Robert Taylor. Domino's has not articulated to me, why it is taking this truculent position by obstructing my exit. After all, exiting is what Domino's required me to do. Exiting is not what I wanted to do. If I am missing something here, please feel free to respond to this email in writing. Merry Christmas Bob

Scott Hinshaw, executive VP of operations, responded to Huth's email on December 25, 2017, saying he would be back in touch when he was back in his office after the holiday. Huth acknowledge it by saying he was available anytime, "today, tomorrow or Wednesday." But Huth did not receive any other response from Domino's.

Bob Huth filed his lawsuit against Domino's Pizza Franchising on December 29, 2017.

He asked the court to require Domino's to specifically perform its obligations under the franchise agreements, which addresses the sell and/or transfer of stores. He asks for declaratory judgment under the Federal Declaratory Judgment Act and asks the court to order Domino's to grant him permission to sell his stores to Peter D'Andrea and Semper Fi Pizza.

Other claims filed against Domino's are for relief for breach of contract, state common law breach of duty of good faith and fair dealing and bad faith, tortious interference with prospective economic advantage, and unfair and deceptive trade practices, N.C. Gen. Statute. Huth is asking for treble damages in the amount exceeding $75,000, the specific amount to be determined at trial; pre-judgment and post-judgment interest; and attorneys' fees, taxed against Domino's to the extent allowed by applicable law.

On April 3, 2018 the case was settled and dismissed, according to PACER docket. A Joint Stipulation of Dismissal with Prejudice was issued in Holiday Delta, Inc. v Domino's Pizza Franchising LLC, stating all parties jointly stipulate to dismiss the case with prejudice. Each party agrees to bear its own attorneys' fees and costs.

Franchisee Huth litigation missing from Domino's Pizza Franchise Disclosure Document

As a requirement of the Federal Trade Commission, franchisors are required to disclosure information about their company under 23 specific categories, including data on the offered franchise, its officers, and franchisees in the system.

Under litigation, Item 3, lawsuits fall into four broad categories: pending lawsuits, lawsuits involving the franchise relationship, prior lawsuits, and current government injunctive or restrictive actions. These include arbitration.

According to the franchise disclosure document by Domino's Pizza Franchising, filed effective 3/28/2018, Domino's discloses one pending litigation. An action was filed by the Attorney General of New York against Domino's and its entities, and three New York franchisees. The AG alleges among other things the defendants failed to pay employees of the franchisees certain wages and expenses, and they are liable for labor law violations as joint employer with its franchisees. Additionally, Domino's has been named as a defendant in several labor and employment lawsuits brought by franchisees' employees.

Domino's discloses six lawsuits that have been concluded.

Holiday Delta, Inc. v. Domino's Pizza Franchising, LLC, was not included in the April 28, 2018 Franchise Disclosure Document

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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.