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Apricot Lane Franchisee Leaves Franchise, Judge Disallows Franchisor to Lease Space

Apricot LaneA nine-unit franchisee of the Apricot Lane chain of women's boutiques has broken away from the franchise, and a federal court has denied the franchisor the right to take over the lease at a franchised location.

The franchisee, Joli Grace LLC, sued the franchisor, Country Visions Inc., last May in federal court in Sacramento, seeking a declaration that the franchisor's non-compete clauses were not enforceable and that the franchisor had breached the franchise agreements, freeing the franchisee of its contractual obligations. Country Visions counterclaimed, alleging that, among other things, the franchisee had stopped paying royalties in June for all nine outlets. The franchisor also raised claims against Joli Grace's owners and affiliated companies, claiming that they had caused and participated in the breaches, and were seeking to have the franchisees break away to join the affiliate's brand, Blu Spero.

Joli Grace raised the stakes in September and converted all nine stores to the Blu Spero name. Country Visions then sought a preliminary injunction to compel the franchisee and Blu Spero to turn over the lease at a location in Hattiesburg, Mississippi, to cease operating as Blu Spero and to cease using the Apricot Lane trademarks. After a hearing in November, the court dismissed all of the claims against the owners and Blu Spero affiliate, and denied the preliminary injunction in all respects. On the lease turnover, the Court noted that Country Visions was asking for a "mandatory injunction," and had failed to meet the higher standards required for that relief. Country Visions argued that the Hattiesburg landlord would accept an assignment of the lease to it, but, the judge noted, "The Hattiesburg landlord is not before the court," and that without the landlord, the court could not compel the assignment. The court denied the request that Blu Spero cease operating, since it had been dismissed from the suit, and denied the request to enjoin use of the Apricot Lane trademarks because there was no record evidence of infringing use.

"The case raises the question of whether a system that has little in the way of uniformity or value for the franchisee has anything to protect," said Michael Garner, counsel to the franchisee. "Apricot Lane stores are free to stock whatever they want, there's no national advertising, no unique product lines, and support comes mainly from other franchisees." Country Visions' 2016 FDD showed that 46 stores had "ceased operations for other reasons" since 2014.

Garner added that since the court's decision, the Blu Spero stores have filed for Chapter 11 for unrelated reasons.

Apricot Lane Boutique was founded in 2007 by Ken Petersen and its 75 franchised retail stores are supported by franchisor Country Visions Inc. The parent company opened its first retail gift store in August 1991 in Vacaville, California.    

Memo & Order to Motion to Dismiss 1st Amended CC & Mot PI (Filed 11-30-16).pdf213.01 KB
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