Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Little Caesars restaurants allegedly failed inspections, breached franchise agreements, (Jul 13, 2016)

By Linda O’Brien, J.D., LL.M.

A former franchisee of two Little Caesars pizza restaurants has breached its franchise agreements by repeatedly failing to comply with company health, food safety, and sanitation standards, according to a complaint filed in the federal district court in Detroit (Little Caesar Enterprises, Inc. v. Hewitt Fam LLC, July 12, 2016).

Little Caesar Enterprises is the franchisor of Little Caesars restaurants that operate throughout the United States and in 18 foreign countries. Little Caesar’s franchisees are licensed to use the trade names and trademarks of Little Caesar and to operate under the Little Caesars system, which involves the production, merchandising, and sale of pizza using special equipment, equipment layouts, accessories, identification schemes, management programs, standards, and specifications.

Hewitt Fam LLC was the owner and operator of two Little Caesars restaurants located in Athens, Georgia, pursuant to franchise agreements executed in November 2012 and April 2015. Mark Jennings, Kelly Jennings, Chris Hewitt, and Cheyenne Hewitt signed the franchise agreements on behalf of Hewitt Fam LLC and personally guaranteed the company’s obligations under those agreements.

The complaint states that Little Caesar provides each of its franchisees with a set of manuals and guidelines that set forth in detail the procedures, methodology, and standards applicable to the operation of a Little Caesars restaurant. In February 2016, Little Caesar conducted inspections of the defendants’ franchises. The defendants were given reviews of the inspections which identified specific deficiencies in their restaurants that: (1) posed an unacceptable risk to the health and safety of Little Caesar’s customers; (2) deviated from operational standards; and (3) constituted irreparable injury to the reputation and goodwill associated with Little Caesar’s trade name and trademarks. The defendants also received a letter from Little Caesar that reiterated the need to cure the deficiencies noted during the inspection.

In March 2016, the complaint alleges, Little Caesar conducted inspections of the defendants’ franchises and found many of the same violations, as well as new violations. The defendants received a copy of the review for the second inspections. In May 2016, the defendants were sent a Notice of Default and Notice to Cure, notifying them of their default under the franchise agreements for repeated failure to comply with franchise operational standards. The defendants had 24 hours from receipt of the notices to remedy all health, safety, and critical operational defaults, and 30 days to cure all other defaults.

Little Caesar again inspected the defendants’ franchises in June 2016 and found that many of same defaults of its health, food safety, and sanitation standards found during the prior inspections remained and new deficiencies were observed, the complaint claims. Accordingly, in a letter dated July 12, 2016, Little Caesar notified the defendants that their franchise agreements had been terminated and they should immediately cease using its proprietary marks. To date, the defendants have allegedly refused to comply with the notice of termination and their post-termination obligations under the franchise agreements.

The plaintiff asserts claims for breach of contract, trademark infringement, unfair competition, and trade dress infringement. The action seeks declaratory and injunctive relief, damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:16-cv-12600-MAG-APP.

Attorneys: Larry J. Saylor and Kimberly A. Berger (Miller, Canfield, Paddock & Stone P.L.C.) and Stephen J. Vaughan (Gray, Plant, Mooty, Mooty & Bennett, P.A.) for Little Caesar Enterprises, Inc.

Companies: Little Caesar Enterprises, Inc.

News: FranchisingDistribution MichiganNews