Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
New Briefs
Burger King Franchisees' Pricing-Minimum Lawsuit Dismissed
The final claim in a lawsuit filed by Burger King franchisees who opposed the pricing of Double-Cheeseburgers on Burger King's Value Menu was dismissed on Nov. 19 by the U.S. District Court for the Southern District of Florida. The lawsuit was filed by the National Franchisee Association (“NFA”), which represents about 75% of Burger King franchisees in the United States.
The November ruling follows a dismissal in April 2010 of most of the claims by Judge K. Michael Moore, who ruled that the franchise agreements “unambiguously conferred on BKC [Burger King Corporation] the right to require franchisees, without their consent, to offer designated items as part of its Value Meal menu and therefore to set unilaterally maximum prices for those items.”
However, that first ruling left open one remaining claim for bad faith. Moore dismissed that claim in November, when he ruled that BKC did not act in bad faith when it set the price of a Double-Cheeseburger at $1. The NFA had argued that the price left franchisees selling food at a loss. The judge agreed with BKC's contention that selling one item below cost “was not an impact so severe as to threaten franchisees with bankruptcy,” which was a key part of the NFA's bad-faith claim. “Section 5 [of the franchise agreement] gives BKC the right to set prices for products sold by franchisees. This includes the discretion to set prices for a single product below cost provided that the pricing decision is one 'which BKC in the good faith exercise of its judgment believes to be desirable and necessary.'”
Issues related to maximum pricing remain significant for BKC and its franchisees. After the lawsuit was filed, BKC raised the maximum price for the Double-Cheeseburger to $1.29, but it introduced a new lunch sandwich and a breakfast sandwich, each priced at $1.
One avenue for the NFA to appeal the decision remained because Judge Moore dismissed without prejudice an allegation of violation of the Florida Deceptive and Unlawful Trade Practices Act. The NFA can ask the court to reconsider the ruling, and it can appeal if the court turns it down. The NFA did not respond to inquiries from FBLA about whether it would ask for a reconsideration or an appeal.
Receivership Expert Predicts Hard Times for Lodging Franchises
Although the recession has increased the number of hotels and motels that have encountered financial hardship, a 30-year veteran of the receivership business said that franchisors in the hospitality business need to be prepared for further deterioration. “Based on the calls that I have been getting from lenders and hotel owners, the pipeline of hotels that are behind on their payments is growing,” said William J. Hoffman, president and CEO of Trigild. “I see the number of receiverships and bankruptcies in the next couple of years increasing by two or three times over what they have been in the last few years.”
Hospitality franchisors will have to work with franchisees that are struggling, as well as with courts, lenders, and receivers, said Hoffman. He will be presenting a paper titled, “An Industry Dialogue: The Impact of Receiverships and Bankruptcies on Brands and Franchise and Management Agreements,” at the 2011 Hospitality Law Conference on Feb. 9-11, 2011, in Houston (conference agenda at www.hospi talitylawyer.com).
As the receiver, Trigild operates the hotel or other business while creditors decide how to dispose of the property. Although the receiver does not work for the franchisor, it is protecting the brand's value and reputation, as well as maintaining cash flow that can help to service debt. “When we are named receiver, or even before we are named receiver, I try to talk with the franchisor about whether the hotel can be saved. Usually, that's the goal because the franchisor wants to maintain a brand presence in the area,” said Hoffman.
Yet, a franchisor will likely have to make concessions during the receivership period. “A hotel operator that has not been making debt-service payments to a lender probably also hasn't been paying royalties or doing necessary maintenance or upgrades. But a lender doesn't want to put more money into a unit that's losing money,” he said. “We have to find a balance, where we identify maintenance that needs to be done to protect the unit, but the other needed upgrades are deferred until the next buyer.”
Finding a buyer for a distressed property typically takes six months to a year, Hoffman said. But he added that the combination of a rise in distressed properties coming on the market and lenders' reluctance to finance purchases could result in longer delays in the next several years.
The final claim in a lawsuit filed by
The November ruling follows a dismissal in April 2010 of most of the claims by Judge K.
However, that first ruling left open one remaining claim for bad faith. Moore dismissed that claim in November, when he ruled that BKC did not act in bad faith when it set the price of a Double-Cheeseburger at $1. The NFA had argued that the price left franchisees selling food at a loss. The judge agreed with BKC's contention that selling one item below cost “was not an impact so severe as to threaten franchisees with bankruptcy,” which was a key part of the NFA's bad-faith claim. “Section 5 [of the franchise agreement] gives BKC the right to set prices for products sold by franchisees. This includes the discretion to set prices for a single product below cost provided that the pricing decision is one 'which BKC in the good faith exercise of its judgment believes to be desirable and necessary.'”
Issues related to maximum pricing remain significant for BKC and its franchisees. After the lawsuit was filed, BKC raised the maximum price for the Double-Cheeseburger to $1.29, but it introduced a new lunch sandwich and a breakfast sandwich, each priced at $1.
One avenue for the NFA to appeal the decision remained because Judge Moore dismissed without prejudice an allegation of violation of the Florida Deceptive and Unlawful Trade Practices Act. The NFA can ask the court to reconsider the ruling, and it can appeal if the court turns it down. The NFA did not respond to inquiries from FBLA about whether it would ask for a reconsideration or an appeal.
Receivership Expert Predicts Hard Times for Lodging Franchises
Although the recession has increased the number of hotels and motels that have encountered financial hardship, a 30-year veteran of the receivership business said that franchisors in the hospitality business need to be prepared for further deterioration. “Based on the calls that I have been getting from lenders and hotel owners, the pipeline of hotels that are behind on their payments is growing,” said William J. Hoffman, president and CEO of Trigild. “I see the number of receiverships and bankruptcies in the next couple of years increasing by two or three times over what they have been in the last few years.”
Hospitality franchisors will have to work with franchisees that are struggling, as well as with courts, lenders, and receivers, said Hoffman. He will be presenting a paper titled, “An Industry Dialogue: The Impact of Receiverships and Bankruptcies on Brands and Franchise and Management Agreements,” at the 2011 Hospitality Law Conference on Feb. 9-11, 2011, in Houston (conference agenda at www.hospi talitylawyer.com).
As the receiver, Trigild operates the hotel or other business while creditors decide how to dispose of the property. Although the receiver does not work for the franchisor, it is protecting the brand's value and reputation, as well as maintaining cash flow that can help to service debt. “When we are named receiver, or even before we are named receiver, I try to talk with the franchisor about whether the hotel can be saved. Usually, that's the goal because the franchisor wants to maintain a brand presence in the area,” said Hoffman.
Yet, a franchisor will likely have to make concessions during the receivership period. “A hotel operator that has not been making debt-service payments to a lender probably also hasn't been paying royalties or doing necessary maintenance or upgrades. But a lender doesn't want to put more money into a unit that's losing money,” he said. “We have to find a balance, where we identify maintenance that needs to be done to protect the unit, but the other needed upgrades are deferred until the next buyer.”
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.
The Stranger to the Deed Rule
In 1987, a unanimous Court of Appeals reaffirmed the vitality of the "stranger to the deed" rule, which holds that if a grantor executes a deed to a grantee purporting to create an easement in a third party, the easement is invalid. Daniello v. Wagner, decided by the Second Department on November 29th, makes it clear that not all grantors (or their lawyers) have received the Court of Appeals' message, suggesting that the rule needs re-examination.