Even When You’re an Angry Franchisee Don’t Refuse to Pay the Franchise Fees

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Franchise Law Attorney

If you have been a renter, at times you’ve likely been mistreated by a landlord due to delays in repairs, mechanical failures, etc. A typical reaction is to withhold rent. Failing to send a rent check is often a wrong approach legally and generally makes things worse.

In a recent case the owners of a Dunkin’ Donuts franchise (watch out for Dunkin’ Donuts (DD) franchises for reasons I’ll gladly explain) franchise did not complete a required renovation of their franchise location, and they stopped paying fees to DD altogether. The franchisor terminated the franchise. But the owners continued operating as a Dunkin’ Donuts store, claiming the failure to complete renovations on time was (in part) the franchisor’s fault, because the franchise owners had submitted a remodeling plan that Dunkin’ Donuts took unusually long to approve.

Nevertheless, the court entered judgement for the franchisor, issuing an injunction against the franchisee, prohibiting the owners from ever operating a DD store that used or infringed upon Dunkin’s trademarks. The court noted that even if the franchisee could win its claim that the franchisor was at fault, it would not prevent the franchisor from terminating the franchise. The court held that a franchisee’s remedy for wrongful termination is a claim for money damages, not continued unauthorized use of the franchisor’s trademarks. The court noted that the franchisee never disputed its default nor questioned Dunkin’s ownership of the trademarks, and therefore decided there was no choice but to rule against the franchisee.

Franchisees may have valid claims against their franchisor. But, to continue operating the franchise, a franchisee must stay in compliance with the franchise agreement – even if the franchisor does not. Failure to maintain this contractual moral high ground will give a franchisor the right to terminate.

To discuss your NJ Franchise matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.