Barry Kurtz dark logoFranchise First and Foremost
May 2011
16000 Ventura Boulevard
Suite 1000
Encino, CA 91436



We are pleased to announce the relocation of our offices, effective as of May 31, 2011, and our new association, as "of counsel" to Ezra Brutzkus Gubner LLP in Woodland Hills, California. Our new address and telephone numbers will be:


21650 Oxnard Street, Suite 500

Woodland Hills, CA  91367

Telephone:  818-827-9229

Fax:  818-449-4808


Ezra Brutkus Gubner LLP [] is a 20+ attorney firm whose areas of practice incude intellectual property and licensing, employment law, apparel industry law, banking and finance, bankruptcy and insolvency, commercial litigation and dipute resolution, real estate law and the representation of trustees in bankruptcy and receivers.  The firm's clients include financial institutions, manufactureres and small, midsize and large businesses.  We will act as franchise counsel for the firm and its clients and the firm will provide our clients with services in its areas of expertise.


We expect to be at our new office with full telephone and e-mail service on Tuesday, May 31.   



As mentioned in our March 2011 Newsletter [click here], the law on the recovery of future royalties remains uncertain. We concluded in March that based on recent case law, every franchise agreement should acknowledge the franchisor's right to recover future royalties and provide that the franchisee's obligation to pay these royalties survives the termination of the agreement.


However, a recent case decided by a Court applying North Carolina law not only held that it was not necessary for a franchise agreement to provide for the recovery of prospective damages, but also found that the franchisor had properly calculated those lost profits.


On the absence of any provision in the franchise agreement, the Court stated that lost profit damages were "reasonably supposed to have been within the contemplation of the parties," and that an express written agreement was therefore not required.  On the calculation of those damages, the Court affirmed the franchisor's formula, which used the average weekly sales of the franchised unit multiplied by the number of weeks in the period for which it sought relief times the average historical royalty rate paid to the franchisor, holding that "using past profits as a basis for calculating future lost profits is a widely accepted methodology."


Undoubtedly, there will be future cases on these subjects.



In a Not for Publication opinion, a recent California court decision found that a franchisor's suit against a former franchisee to enforce a covenant not to compete in the franchise agreement satisfied the "malice" requirement in a case for malicious prosecution. According to the Court, since covenants not to compete imposed by a franchisor against a franchisee have been prohibited since 1872 and since the franchisor had previously engaged in three California lawsuits in which similar covenants were not enforced, the franchisor "was at best indifferent as to whether [the enforcement of the covenant] had any basis in fact" and "a reasonable inference on this evidence is that [the franchisor's] claims were brought for an improper purpose."


Expect franchisee attorneys to pursue this theory in the future.



In April 2011, Barry Kurtz was elected as a member of the Board of Directors of the Valley Community Legal Foundation of the San Fernando Valley Bar Association, the charitable arm of the San Fernando Valley Bar Association. The Foundation raises funds to assist needy students in the community who wish to pursue a career in a legally related profession and for the creation of child care facilities in courthouses throughout the San Fernando Valley.

This communication published by Barry Kurtz, APC is intended as general information and may not be relied upon as legal advice, which can only be given by a lawyer based upon all the relevant facts and circumstances of a particular situation.

Copyright Barry Kurtz, A Professional Corporation 2010 
All Rights Reserved.

In This Issue
We Are Moving!
Franchisor 101: Around and Around and Around
Franchisee 101: "Let's Throw It In and See What Sticks" Approach May Be Expensive
Article Headline

Contributing Expert


Scott Barer, Esq.


The Perils of Worker MIsclassification 


Barry Kurtz
Barry Kurtz is a prolific writer on the subject of franchise law. From due diligence to franchise appraisal, his articles are a valuable resource to any franchisee and franchisor.  He has been named a Certified Specialist in Franchise and Distribution Law by the State Bar of California Board of Legal Specialization.

Visit our website for more articles
16000 Ventura Boulevard, Suite 1000
Encino, CA 91436