Keep Off My (Virtual) Lawn: Encroachment in the Age of the Internet

April 6, 2017Articles Franchise Law Journal

The Internet has made reaching customers across the country and around the world much more possible and feasible for businesses. Franchisors should take advantage of the power of the Internet to reach new customers; maintaining the online presence of the franchise sys- tem is one way to do accomplish this goal. Franchises now offer sales over the Internet to allow customers additional convenience and flexibility when ordering products or services from the franchise. Although setting up a website can be a simple process, the Internet presence of franchise systems Internet may be complicated by concerns over encroachment issues as well as promises of territory exclusivity. Although encroachment, exclusivity, and the size of a territory have often been areas of contention between franchisors and their franchisees, Internet and online sales have further complicated this relationship.

Prior to the explosion of Internet commerce, many franchise agreements did not address the issue of electronic encroachment. Franchisors did not anticipate the need to address electronic encroachment and instead focused their efforts on brick-and-mortar, physical encroachment concerns. Because of this, franchisors have faced problems arising out of existing franchise agreements, which contained exclusive territory provisions but did not ad- dress Internet commerce. Many franchisors wished to capitalize on the Inter- net market as it was developing, but had difficulty when faced with sales to consumers in areas where an exclusive franchisee was operating. It is critical franchisors ensure they have addressed this issue or risk an unhappy franchisee suing under a theory of electronic encroachment.

This article will examine the current state of the law regarding electronic encroachment claims by franchisees. The first part of this article will discuss the history of encroachment claims, both traditional encroachment claims involving physical territory disputes as well as claims involving electronic encroachment. The second section will discuss the current status of the law regarding electronic encroachment through a summary and examination of several arbitration panel decisions and court decisions. Third, it will describe the parallels and differences in approaches taken by courts if the issue involves a claim for traditional encroachment or instead involves alleged electronic encroachment. Finally, it will offer recommendations to franchisors on how they can best avoid electronic encroachment claims by franchisees. Franchisors can increase their revenues by offering sales through the Inter- net and other electronic means; however, they must ensure they have properly reserved this right to themselves and have not opened the door to a franchisee's successful claim for electronic encroachment.

I. Traditional Encroachment: A History

An encroachment claim by a franchisee typically arises out of the franchisee's belief that the franchisor has improperly violated the terms of the territory it granted to the franchisee.1 Although some franchisors continue to offer exclusive territories, this practice has been in gradual decline.2 Physical, or traditional, encroachment typically occurs when a franchisor grants a license to a competing franchise within territory already given or very close to an existing franchise. Another type of traditional encroachment arises when the franchisor opens a company-owned store within the territory of the franchisee, which is then in direct competition with the franchisee for customers and sales.

An expansive definition of traditional encroachment was supported and articulated in Scheck v. Burger King3 and Vylene Enterprises, Inc.v. Naugles, Inc.4 Scheck owned a Burger King franchise in Lee, Massachusetts, and filed suit against the franchisor when the franchisor permitted the Marriott Corporation to convert a Howard Johnson restaurant located only two miles away from his location into a Burger King franchise.5 One of Scheck's claims was that the franchisor had violated the implied covenant of good faith and fair dealing by permitting this new restaurant to open within two miles of his existing franchise.6 The franchise agreement at issue did not grant Scheck the right to an exclusive territory, but the U.S. District Court for the Southern District of Florida held this fact did not necessarily mean Burger King had the right to place other stores in the nearby area unless the right to do so had been expressly retained, which it had not.7 The court found that the franchisor's "alleged failure to exercise [its] discretion with good faith and fair dealing" was sufficient to state a claim such that summary judgment was inappropriate.8

The reasoning of this decision was cited with approval by the Ninth Circuit in Vylene. In the Vylene case, the franchisor opened a company-owned restaurant approximately one-and-a half miles from a franchisee's existing location.9 The  franchisee  alleged  the  franchisor  had  breached  the  covenant of good faith and fair dealing by opening a restaurant that directly competed with the franchisee.10 Citing to Scheck, the court stated that "the franchisee, although not entitled to an exclusive territory, was still entitled to expect that the franchisor would ‘not act to destroy the right of the franchisee to enjoy the fruits of the contract.' "11 The court's reasoning in Scheck was heavily criticized and somewhat discredited.12 Much of  the  criticism  focuses  on how, in practical effect, the reasoning of both Scheck and Vylene give the franchisee the right to an exclusive territory, something the franchise agreement did not  specifically grant.13

The reasoning of Scheck, however, has been narrowed.14 In Burger King Corp. v. Weaver, the Eleventh Circuit held that "[t]he rights and duties of the parties to a franchise agreement are created by the agreement. In the absence of an agreement, neither party has a duty to perform and neither has a right against the other."15 Furthermore, "if one party to a contract has no right to exclusive territory, the other party has no duty to limit licensing of new restaurants."16 Although the reasoning of Scheck has been restricted by courts,17 franchisees often continue to cite to this case when bringing a claim under a theory of traditional encroachment.

Electronic encroachment is different than traditional encroachment. Generally, electronic encroachment refers to sales on any type of platform other than a traditional, in-person purchase at a franchise location. This could include catalog sales, telephone sales, and Internet sales.18 Often, when a franchise first begins, the franchisor may not have considered offering sales through the Internet or over the phone; thus the franchise agreements will not address this area. As an additional complication, franchisees are often skeptical of a franchisor's online sales system in that they may "believe[] that any franchisor with an e-commerce presence [has] become a competitor and that every Internet sale represent[s] a franchisee's lost sale."19 Although this attitude may have changed as Internet commerce has become more common, accepted, and anticipated, franchisees are likely still wary of the franchisor's ability to control Internet commerce and may attempt to bring claims against a franchisor under a theory of electronic encroachment.

II. Development of Electronic Encroachment

Initially, franchise territory provisions focused on physical, brick-and-mortar encroachment, and agreements defined territories by various methods, including by mileage radius, population density, or county boundaries. Today, especially with the large increase in consumer Internet usage, electronic encroachment claims will continue to be an issue franchisors face. Many franchise agreements contain arbitration provisions; therefore, several electronic encroachment cases have been resolved through arbitration rather than through the courts. These decisions may be instructive as to how a franchisor may limit its exposure to claims of electronic encroachment. There have been some court cases, however, which have addressed franchisee claims of electronic encroachment.

A. Arbitration Decisions

One of the earliest arbitration decisions regarding electronic encroachment arose in Emporium Drug Mart, Inc. v. Drug Emporium, Inc. of Denton.20 Drug Emporium, Inc. (DEI) was the franchisor of Drug Emporium drug- stores; in 1997, it began experimenting with offering an online drugstore. Initially, DEI did not serve customers through this website if the customers were in a franchisee's protected territory, but later modified its website to permit such direct sales. It proposed a plan to share with franchisees 1.25% of Internet gross sales from customers within a franchisee's protected territory.21 In August 1999, the franchisor launched a new website that made no reference to the physical franchise locations. As part of the new website, DEI proposed to pay franchises a 2.5% commission on any online sales generated from customers within a franchisee's protected territory.22 Several franchisees objected to this proposal and, following DEI's refusal to modify it, began an arbitration action against DEI, alleging breach of contract and breach of the implied covenant of good faith and fair dealing due to the alleged electronic encroachment by the franchisor.23 While these claims were pending, DEI announced a proposed sale of its website to an online drug retailer, and the franchisees immediately filed a motion for a preliminary in- junction, claiming the franchisor's electronic encroachment into their territories was causing them irreparable harm.24  A divided arbitration panel granted the franchisees' motion for preliminary injunction, finding that the virtual store was a  store  under  the  franchise  agreement  based  in  part  on the franchisor's advertising of the website as a full service online drugstore.25 The arbitration panel agreed with the franchisees that there was a reasonable expectation in the agreement that the franchisees would not be competing against the franchisor in direct drugstore sales, and the franchisor's website was a type of direct competition.26 This decision appears to give franchisees wide latitude in asserting claims for electronic encroachment, similar to the arguments franchisees were asserting under the reasoning of Scheck. However, following the arbitration panel's decision in the Drug Emporium case, other arbitration panels and courts began limiting electronic encroachment causes of action.

A different arbitration panel rejected a franchisee's electronic encroachment claim a year later in Hale v. Conroy's, Inc.27 In this case, the franchise agreement granted Hale an exclusive territory of two miles from his flower shop. Following the signing of this agreement, the franchisor launched a telephone-ordering network, to which Hale consented.28 However, when the franchisor began offering online ordering, the franchisee sued for electronic encroachment. The arbitration panel rejected the franchisee's claim, finding the franchisor's actions were not the same as if the franchisor had operated a physical store.29 The agreement to which the franchisee voluntarily agreed regarding telephone sales also reserved the right of the franchisor to develop new technologies for ordering. Finally, the franchisee was aware of the Internet at the time of signing this agreement, further supporting the franchisor's argument that it had the right to conduct these sales.30

In Franklin 1989 Revocable Family Trust v. H & R Block, Inc., an arbitration panel rejected another franchisee's electronic encroachment claim. The franchisee was granted a particular territory and promised that the franchisor would not operate a tax preparation service within its territory; however, the franchisor then began selling tax preparation software throughout the United States directly to consumers.31 The exact phrasing in the franchise agreement was that the franchisor would not operate a tax preparation service "from a location within the franchise territory;" the panel found this to be ambiguous as to Internet sales, looking then to the implied covenant of good faith and fair dealing.32 The panel determined, however, that there was no violation of good faith or fair dealing because the franchisee had not suffered an unreasonable impact on its business due to the electronic sales.33

B. Court Decisions

Several courts have also been asked to address electronic encroachment claims.

In Armstrong Business Services, Inc. v. H & R Block,34 the franchisees made a similar argument as the franchisees in the Franklin 1989 case. They argued that, by selling tax preparation software online, the franchisor committed breach of contract, breach of good faith and fair dealing, and unfair business practices.35 The franchise agreements in this case were somewhat different than those in the Franklin 1989 case in that they did not contain any express references to the Internet, but they did include a "broad grant of an exclusive territory for tax preparation and for related services."36 H & R Block argued Internet customers could not be considered a "related service," but a jury disagreed, finding for the plaintiff.37 Although this case could be read as a step back toward the reasoning of Drug Emporium, this is not necessarily true. The court focused on the exact language of the contract at issue rather than implying a further duty of good faith and fair dealing on the franchisor. This case demonstrates the court's emphasis on the specific language regarding Internet sales contained in the franchise agreement.

A more recent court decision in the area of electronic encroachment arose in Michigan in Pro Golf of Florida, Inc. v. Pro Golf of America, Inc.38 This case involved a dispute between Pro Golf of America (PGA), a golf store franchisor, and one of its franchisees. In 1999, PGA announced to its franchisees its intent to sell golf products over the Internet and formed a new corporation to manage these Internet sales.39 The franchisor would allow franchisees to invest in the Internet sales corporation, but after receiving objections from several franchisees and difficulty obtaining financing, abandoned the idea for several years.40 Two years later, PGA once again attempted to begin an Internet business and asked franchisees to sign a " Internet Participation Agreement."41 This agreement proposed a commission system by which franchisees would receive a percentage of sales from customers within their territories in exchange for other obligations.42  The Internet participation agreement also required franchisees "to waive any territorial rights that the franchise agreements may have afforded them in the area of Internet sales."43 The plaintiff franchisee did  not  sign  the  Internet  participation  agreement, and the franchisor initially agreed to block Internet sales to customers located in the plaintiff 's franchise territory; however, in 2004, PGA decided that Internet sales of the golf merchandise did not violate the franchise agreement with plaintiff and expanded Internet sales into all territories.44 After learning of this plan for expanded Internet sales, the franchisee sent a notice of default to the franchisor, stating its belief that PGA had breached the franchise agreement by offering Internet sales to customers in the franchisee's territory.45 During the mandatory cure period, the franchisor attempted to address the franchisee's concerns, but in February 2005 the franchisor received a letter from the franchisee  seeking  termination  of  the  franchise  agreement  due  to the Internet sales dispute.46 The parties were unable to resolve their conflict regarding Internet sales, and PGA filed a demand for arbitration in 2005.47 The franchisees initiated a lawsuit and sought a stay of the arbitration proceedings, which was granted by the court.48

The franchisees argued PGA breached the franchise agreements through the Internet sales of golf merchandise, seeking partial summary judgment on the issues of whether the franchisor breached the franchise agreement and whether the franchisee was therefore entitled to terminate the franchise agreement.49 The franchisee operated three stores—one in Tennessee and two in Florida. The Tennessee territory restriction specified mileage radii within which the franchisor agreed it would not place a new franchise location.50 The restriction in the Florida franchise agreement was based on particular counties, and it stated the franchisor would not permit additional stores in two specified counties.51 Neither franchise agreement nor either territory restriction section addressed the issue of Internet sales; however, the court found the language of the franchise agreements to be unambiguous.52 The court stated that to determine whether the franchisor breached the territory provisions of the franchise agreements, it must determine where the Internet sales occurred. Since neither party had submitted copies of sales invoices or ship- ping documents to identify the contractual terms that would disclose when title passed from the seller to the buyer, there was a question of fact as to whether the sales were made within the franchisee's defined territories.53

The court found it was possible, if not likely, that the Internet sales did not occur within the plaintiff 's defined territories.54 Additionally, the franchisees did not have an exclusive right to sell PGA's merchandise to customers residing within its territory, regardless of how or where the merchandise was purchased.55 Because there was a question of fact regarding whether the Internet sales were made in the franchisee's defined territories, summary judgment for the franchisee  could not be granted.56

The court's reasoning in this case supports the idea that, even in the absence of an express provision in the franchise agreement regarding Internet commerce, a franchisor's Internet sales to customers located in a franchisee's exclusive territory may not be a violation of the franchise agreement. Pro Golf of America arose prior to the explosion of electronic commerce and expansion of Internet sales, but the reasoning of this court appears to support the idea that a franchisor is able to operate a website offering sales through the Inter- net to customers located in a franchisee's exclusive territory.

More recently, the U.S. District Court for the Southern District of California examined a franchise agreement under Texas law in Stillwell v. RadioShack Corp.57 In this case, each plaintiff-franchisee operated a RadioShack franchise, and they sued the franchisor for violations of several provisions of the franchise agreement, including the territory restriction, under a theory of electronic encroachment.58 The territory provision of the agreements referred to an "area of primary responsibility," which guaranteed to the franchisee that the franchisor would not open a company store or authorize another franchise within the area without first giving the existing franchisee the option to open such a store and that the franchisor would not authorize the establishment of an "authorized sales center" within the territory.59 The plaintiffs argued RadioShack violated this provision by operating as an Internet store and directing customers to make their purchases from the Internet store.60 The district court examined the plain language of the territory provision, finding that it only prohibited RadioShack from doing the actions specifically mentioned within this section. The provision was not ambiguous and, on its face, did not prohibit Internet sales by the franchisor. Therefore, the district court granted RadioShack's motion for summary judgment.61

The franchisee also sued for violation of the covenant of good faith and fair dealing, which was a stated provision in the franchise agreement.62 Interpreting this agreement under Texas law, the court stated that there generally is not an implied covenant of good faith and fair dealing unless there is a "special relationship" between the parties.63 Under Texas law, a franchisor-franchisee relationship is not considered a "special relationship," so the plaintiffs' claim for breach of the covenant of good faith and fair dealing could only be based on the terms of the franchise agreement.64 Because a provision in the franchise agreement stated that both parties would be governed by the standards of good faith and fair dealing, the court examined whether any of the franchisor's actions may have violated this duty. The district court found that the franchisor's Internet sales may have violated the express duty of good faith and fair dealing when offered merchandise directly to consumer at prices lower than the wholesale prices offered to franchisees and required the franchisee accept returns of merchandise ordered from Because there were issues of material fact regarding this provision, the district court denied the motion for summary judgment on this claim.66

Stillwell v. RadioShack demonstrates how this court examined the pure language of the franchise agreement when it came to territory restrictions and electronic encroachment rather than implying a covenant of good faith and fair dealing. If the agreement itself contains explicit language imposing a duty of good faith and fair dealing, however, a court may enforce it.

Finally, Newspaper, LLC v. Party City Corp.67 recently addressed the issue of electronic encroachment and the scope of a territory restriction. The plaintiff and its affiliates owned numerous franchises across Minnesota, Wisconsin, Iowa, North Dakota, and Texas.68 The franchisor was involved in a series of mergers, resulting in the signing of a new general agreement with Newspaper.69 In this agreement, Newspaper was given the exclusive right to operate franchise stores in its region, but the franchisor reserved the right to sell products through other channels of distribution, including the Internet.70 At the time of signing, the website was used primarily for marketing and communication purposes and did not offer products for direct sale to customers.71 Approximately two years after this agreement was signed, the franchisor launched an expansive Internet store offering the same products sold at retail locations, angering many franchisees, including Newspaper.72

In 2010, in an effort to resolve the conflict, Newspaper and other franchisees executed an addendum that focused on Internet sales. This addendum affirmed the franchisor's rights to sell products online, and in exchange, News- paper would receive a share of revenue from Internet sales based on the customer's location. Newspaper further agreed to accept returns for online sales.73 In 2013, Newspaper filed suit against the franchisor alleging the franchisor had  breached  the  exclusivity  agreement  by  conducting  Internet sales.74 The franchisor filed a motion to dismiss  this  breach  of  contract claim, which the court granted. The court stated that although the franchisor granted Newspaper exclusive rights in establishing Party City stores in a specific territory, it explicitly reserved the right to conduct sales through alternate channels.75 These alternate channels specifically  included  wholesale sales and sales by or through the Internet.76 Moreover, the franchisees entered into an addendum regarding the Internet, which permitted the franchisor to conduct Internet sales while obligating the franchisor to share a portion of the revenue with a franchisee if the sold products were delivered to an address within the area as defined by the franchise agreement.77 The court found that Newspaper failed to establish a breach of contract claim regarding the online sales. The agreement stated, in part, that: "Party City shall have the right to sell its goods ‘by or through the Internet.' "78 More importantly, Newspaper expressly agreed in the addendum that the franchisor could sell the products online to any customer and through any method.79 Therefore, the court granted the franchisor's motion to dismiss on this claim.80

III. Courts' Approaches to Traditional versus Electronic Encroachment Claims

As the use of the Internet has expanded, courts have been forced to interpret and examine franchise agreements that both do and do not specifically address Internet commerce. When looking at a traditional encroachment case, courts have focused on the specific language of the franchise agreement as to the distance and the type of location that will not be included in the agreement.81 Although the reasoning of Scheck has been narrowed in recent cases, its reasoning continues to confuse the issues surrounding traditional encroachment. If a territory restriction is drafted clearly in a franchise agreement, courts will often interpret the language as written; however, there continues to be recognition by courts that a franchisor cannot act in bad faith.82 In several states, courts have continued to focus on the implied covenant of good faith and fair dealing when examining claims under traditional encroachment.83

Prior to the widespread acceptance and use of Internet commerce, courts attempted to incorporate the principles of traditional encroachment claims when faced with franchisee complaints based on electronic encroachment. In early arbitration decisions, arbitrators looked more to the expectations of the parties, applying similar reasoning as under the theory of the implied covenant of good faith and fair dealing.84 As the Internet became more accepted as a stream of commerce, however, courts focused much more on the specific language of the contract and territory terms at issue. Additionally, courts shifted their focus more quickly to the specific language of the agreement when examining an issue of electronic encroachment than when presented with a claim under traditional encroachment. In examining the territory provisions in respect to electronic encroachment, courts today may use black-letter contract and commercial law analysis rather than at- tempt to rewrite the agreement due to an unforeseen development or event, such as new technology.85 Courts generally seem to approach these agreements by being bound by the writing, which often restricts the ability of a franchisee to achieve a more favorable interpretation and allows a franchisor greater latitude in constructing territory restrictions.

IV. Recommendations for Franchisors

As Internet commerce continues to grow and franchises focus on reaching the public not only where there are franchise locations but also through the Internet, properly formulated territory provisions have become even more critical. Many franchisors will want to control all Internet commerce rather than allow individual franchisees to be responsible for these sales. This allows the franchisor to maintain control of the products and its marks while also increasing its own revenue. In order to address concerns over electronic encroachment, franchisors have taken a variety of approaches. These may include no territorial exclusivity, a type of revenue sharing model, a form of an advertising co-op, or other methods.

Although a franchisee may be seeking to receive an exclusive territory, granting a franchisee an exclusive territory may not be the best practice for a franchisor. Should a franchisor grant a franchisee an exclusive territory in the franchise agreement, a court may find this would require the franchisor to permit the franchisee to either manage, or at least receive a percentage of, any sales through the Internet or over the telephone, especially if the franchise agreement does not address such electronic sales. A franchisor would be wise to examine all of its agreements to determine whether Internet commerce is specifically addressed.

Additionally, a franchisor may be better served by not granting the franchisee an exclusive territory. This would allow a franchisor to ensure it is not subject to a claim for electronic encroachment if no territory restrictions have been violated. However, prospective franchisees may be wary of entering into a franchise agreement without any type of assurance that the franchisor will not place another franchisee or company store within close proximity.

There can be, however, language in the franchise agreement that balances the concerns of a franchisor regarding potential electronic encroachment claims with a franchisee's fears of competition directly from the franchisor or another franchisee. For example, a franchisor could not grant an "exclusive" territory, but, instead, include assurances that it will not grant a second franchisee a physical, brick-and-mortar location within a certain radius of the initial franchisee. Moreover, it is recommended that a franchisor include specific language in the franchise agreement that reserves its ability to exclusively conduct Internet and other types of electronic sales. If the franchisor includes such specific language in its franchise agreement, a court will most likely interpret the language as written in the contract. For example, the franchise agreement could reserve to the franchisor the right to provide services or products also offered to the franchisee through "alternate channels of distribution." These alternate channels of distribution could then be de- fined as including, but not limited, to the Internet, World Wide Web, catalog sales, telemarketing, telephone sales, or other similar methods. By keeping the language broad, the franchisor gives space for the development of new technology or sales methods. The agreement should clarify that a franchisee will not and has no right to receive revenues or other compensation from sales made through such alternate channels of distribution. The franchise agreement may also then state that the franchisee cannot use the alter- nate channels of distribution to make sales within its territory or outside of this territory. This type of specific and definitional language should make it clear to the franchisee, and a court or arbitration panel should a franchisor be subject to suit, that the franchisor has given the franchisee no rights relating to electronic sales. Specifically addressing Internet, telephone, and catalog sales diminishes the likelihood that a franchisee could successfully assert a claim for electronic encroachment.

Finally, it would be best for a franchisor to refrain from including a specific provision stating that the actions of both the franchisor and franchisee will be governed under standards of good faith and fair dealing, as was the case in Stillwell v. RadioShack.86 Although the provisions of the agreement may still be subject to this standard in some jurisdictions, a court is more likely to interpret the territory provision of the agreement under the black letter language rather than implying such a duty into the agreement.

V. Conclusion

Franchisors have faced encroachment claims from franchisees for many years, but the rise of the Internet and sales through other channels of commerce has brought forth electronic encroachment claims. Initially, courts were uncertain how to address these claims, especially when franchise agreements did not anticipate the prevalence of the Internet, and struggled with examining such claims under a theory of good faith and fair dealing. However, many courts began examining electronic encroachment claims using contract analysis reasoning, focusing on the exact language of the franchise agreement and the territory restrictions rather than implying any type of additional duties on the franchisor or franchisee. As Internet commerce has be- come more prevalent and anticipated, franchisors are advised to update their franchise agreements to more specifically address Internet commerce and other alternate channels of distribution. Franchisors should ensure they expressly reserve such methods of sales for themselves rather than subjecting themselves to a court's interpretation of the territory provisions of the agreement. As Internet usage continues to expand and other technologies become available, franchisors can protect themselves from electronic encroachment claims by ensuring they address such issues from the outset in the territory provisions of the franchise agreements.

  1. Robert W. Emerson, Franchise Encroachment, 47 AM. BUS. L.J. 191, 193 (2010).
  2. Id. at 206.
  3. 756 F. Supp. 543 (S.D. Fla. 1991).
  4. 90 F.3d 1472 (9th Cir. 1996).
  5. Scheck, 756 F. Supp. at 545.
  6. Id. at 549.
  7. Id.
  8. Id.
  9. Vylene, 90 F.3d at 1474.
  10. Id. at 1477.
  11. Id. (citing Scheck, 756 F. Supp. at 549).
  12. See, e.g., Payne v. McDonald's Corp., 957 F. Supp. 749, 760 (D. Md. 1997); Barnes v. Bur- ger King Corp., 932 F. Supp. 1420, 1437 (S.D. Fla. 1996); Burger King Corp. v. Holder, 844 F. Supp. 1528, 1530 (S.D. Fla. 1993).
  13. See Kathryn Lea Harman, The Good Faith Gamble in Franchise Agreements: Does Your Im- plied Covenant Trump My Express Term? 28 CUMBERLAND  L. REV. 473, 505 (1997–98).
  14. 169 F.3d 1310 (11th Cir. 1999).
  15. Id. at 1317.
  16. Id.
  17. See, e.g., Camp Creek Hospitality Inns, Inc. v. Sheraton Franchise Corp., 139 F.3d 1396 (11th Cir. 1998); Clark v. America's Favorite Chicken Co., 916 F. Supp. 586 (E.D. La. 1996); Barnes v. Burger King Corp., 932 F. Supp. 1420 (S.D. Fla. 1996); Cook v. Little Caesar Enters., Inc., 972 F. Supp. 400 (E.D. Mich. 1997).
  18. See Emerson, supra note 1, at 223.
  19. Gaylen L. Knack & Ann K. Bloodhart, Do Franchisors Need to Rechart the Course to Internet Success?, 20 FRANCHISE L.J. 101, 134 (2001).
  20. Id. Because this was an arbitration, the decision and accompanying records are not publicly available.
  21. Id. at 135.
  22. Id.
  23. Id.
  24. Id.
  25. Id.
  26. Id.
  27. Gary R. Duvall, Using the Web More Effectively, FRANCHISE L.J. 173, 175 (2005).
  28. Id.
  29. Id.
  30. Id.
  31. Id.
  32. Id.
  33. Id.
  34. 96 S.W.3d 867 (Miss. Ct. App. 2002).
  35. Id. at 870.
  36. Duvall, supra note 27, at 175 (internal quotations omitted).
  37. Id.
  38. No. 05-71380, 2006 WL 508631 (E.D. Mich. Mar. 1, 2006).
  39. Id. at *1.
  40. Id.
  41. Id.
  42. Id.
  43. Id.
  44. Id.
  45. Id.
  46. Id. at *2
  47. Id.
  48. Id.
  49. Id.
  50. Id. at *4.
  51. Id.
  52. Id. at *5.
  53. Id. at *6.
  54. Id. at *7.
  55. Id.
  56. Id.
  57. 676 F. Supp. 2d 962 (S.D. Cal. 2009).
  58. Id. at 969.
  59. Id.
  60. Id. at 970.
  61. Id. at 971.
  62. Id. at 968. The agreement stated that neither the franchisor nor the franchisee "shall do or fail to do anything which would deprive the other party of the benefits of [the Franchise Agreement], meaning that both [franchisor and franchisee] shall be governed by the standards of good faith and fair dealing." Id. at 975.
  63. Id. at 974.
  64. Id. at 975.
  65. Id. at 976.
  66. Id.
  67. No. 13-1735 ADM/LIB, 2013 WL 5406722 (D. Minn. Sept. 25, 2013).
  68. Id. at *1.
  69. Id.
  70. Id.
  71. Id.
  72. Id.
  73. Id. at *2.
  74. Id.
  75. Id. at *4.
  76. Id.
  77. Id.
  78. Id. at *5.
  79. Id.
  80. Id.
  81. See, e.g., Burger King v. Weaver, 169 F.3d 1310 (11th Cir. 1999).
  82. See, e.g., Servpro Indus., Inc. v. Pizzillo, No. M2000-00832-COA-R3-CV, 2001 WL 120731 (Tenn. Ct. App. Feb. 14, 2001) (including discussion that franchisor cannot act in bad faith).
  83. See Thomas A. Diamond, Proposed Standards for Evaluating When the Covenant of Good Faith and Fair Dealing Has Been Violated: A Framework for Resolving the Mystery, 47 HASTINGS L.J.  585  (1996).
  84. See Knack and Bloodhart, supra note 19, at 134 n.3 (discussion of Emporium Drug Mart, Inc. v. Drug Emporium, Inc., No. 71 114 0126 00 (Am. Arbitration Ass'n 2000).
  85. See Emerson, supra note 1, at 228 (discussing Pro Golf of Fla., Inc. v. Pro Golf of Am., Inc., No. 05-71380, 2006 WL 508631 (E.D. Mich. Mar. 1, 2006)).
  86. See, e.g., Stillwell v. RadioShack Corp., 676 F. Supp. 2d 962, 975 (S.D. Calif. 2009).

Article originally appeared in Volume 36-3 (Winter 2017) of the Franchise Law Journal. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.