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'Ambiguous' Franchise Agreement Sinks Franchisor

By Scott M. Ratchick
November 30, 2015

The U.S. Court of Appeals for the Eleventh Circuit recently affirmed a judgment entered in favor of a group of franchisees who sued for breach of contract when the franchisor charged them royalties and fees that the parties negotiated specifically to exclude from their franchise agreements. Coyote Portable Storage v. PODS Enterprises, No. 13-14996 (11th Cir. 2015).

Background

The franchisor, PODS Enterprises, a national moving and storage company, had negotiated with a few of its early franchisees to exclude revenue from a certain segment of the business, the “cross-country moves” segment, from the definition of “net sales” on which PODS charged royalties and fees. But as the business grew, the “cross-country moves” segment turned out to be very lucrative, so despite its agreement, PODS charged royalties and fees on that revenue.

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