T-Bird Nevada LLC v. Outback Steakhouse (2010)

A group of franchisees (Shannon) sued Outback alleging that Outback and some of its employees had wrongfully induced Shannon to open 46 Outback Steakhouses in the California franchise market by falsely promising to buy Shannon's restaurants and ensure nonrecourse financing until a buy-out was completed. Shannon also alleged that Outback never disclosed these promises in their public filings because they did not want the liability reflected on their financial statements in order to avoid any potential difficulty obtaining shareholder approval for a planned sale of the company. When the $35 million loan became due the franchisees did not repay it, and the loan was not extended. The bank then notified Outback that it would enforce the guaranty against Outback. Outback then paid the loan to the bank and filed suit in Florida seeking to be repaid by the franchisees. The franchisees argued that the franchisor was prohibited by the California Franchise Practices Act from filing suit against the franchisees anywhere but in California. Outback argued that the suit in Florida did not involve the Franchise Agreement and could therefore proceed in that Court. The California Court rejected the franchisor's argument and held that because the loan agreement set forth additional types of default that would be incorporated into the Franchise Agreement, the loan agreement was an "amendment" to the Franchise Agreement and, therefore, the franchisor was required to sue in California, not Florida

Randy Hetrick and Cindy Hetrick v. Ideal Image Development Corporation (2010)

Individual shareholders of a corporate cosmetic laser business franchisee did not have standing to sue a franchisor under the Florida Franchise Act (FFA) as it was the corporate franchisee that signed the Franchise Agreement and thereby invested in the franchise. The relevant question for standing under the FFA was which person "invested" in the franchise. The franchisees argued that the corporate entity did not come into being until after the Franchise Agreement was executed, and therefore they, not the corporation, had "invested" in the franchise. However, the court rejected this argument ruling that the record demonstrated that the individuals were acting as promoters for the unformed corporate franchisee when they signed the Franchise Agreement, and that the corporate franchisee unambiguously adopted or ratified that agreement by implication, causing any rights under the FFA to accrue to it. Thus, for legal purposes, it was the corporate franchisee that signed the Franchise Agreement and "invested" in the franchise. Consequently, Florida's shareholder standing doctrine prevented the individuals from pursuing individual claims under the FFA

Kevin McLaughlin v. The Krystal Company (2010)

A restaurant franchisor did not breach its agreement with a franchisee by attempting to place extra-contractual conditions on the franchisee's exercise of its renewal right and by ultimately terminating the franchisee. After the franchisee submitted a timely renewal request, the franchisor told the franchisee that it recommended that it relocate to a free-standing location or carry out extensive renovations to the existing location. The franchisor granted the franchisee several extensions of their agreement in the two-year period following its expiration date; however, the franchisor eventually terminated the franchise following the franchisee's failure to make the required improvements. The franchisee did not allege that the franchisor did not have the right under the Franchise Agreement to require the upgrades. Instead, the franchisee argued that the franchisor's true motive was to itself open a franchisor-owned free-standing restaurant near the franchisee's location after the franchisee was terminated. However, because the parties' agreement expressly stated that the franchisee did not have a protected territory, the agreement did not prohibit the franchisor from opening up another restaurant in the area even while the franchisee's restaurant was still operating.