A U.S. district judge in Virginia has ruled that a restaurant chain operator is liable for breach of contract
and is obligated to pay a franchise consulting company for sales and marketing
services that the consultant performed for the chain under the contract between
the two companies. Rejecting the contract defenses of lack of standing,
fraudulent inducement, lack of specificity, lack of mutuality, and
unconscionability, U.S. District Judge T.S. Ellis, III, of the Eastern District of
Virginia, granted summary
judgment in favor of the consultant.
The case arose from a 2008 contract
between Freshii Development, LLC, which owns a chain of healthy fast-food
restaurants, and Fransmart, LLC, an Alexandria,
Va.-based company that agreed, in exchange for a percentage of franchise fees
and revenues, to help Freshii expand by finding appropriate franchisees for its
restaurants. In early 2010, Fransmart restructured its business and set up a
new company to which it assigned its contracts and transferred its assets and
liabilities. Freshii then stopped paying Fransmart under the contract, and
Fransmart sued for breach. Freshii asserted five defenses to the lawsuit, all
of which Judge Ellis rejected.
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