Antitrust Law Daily Wrap Up, FRANCHISNG & DISTRIBUTION NEWS: Italian ice franchisor allegedly breached contract over franchise development rights, (Dec 7, 2015)

By Linda O’Brien, J.D., LL.M.

The franchisor of Rita’s Italian Ice franchisees formed a contract with two potential franchisees for the acquisition of the area development rights to franchise locations in the State of Arizona and then breached the contract by awarding those development rights to a third party, according to a complaint filed in the federal district court in Phoenix, Arizona (Farace v. Rita’s Water Ice Franchise Company, December 2, 2015).

Rita’s Water Ice Franchise Company is an international franchisor of “Rita’s Italian Ice” franchises that sell Italian ice, frozen custard, and specialty creations.

According to the complaint, in November 2014, Anthony Farace and Francis Atrash began negotiations with Rita’s director of franchise development to acquire the rights to develop Rita’s Italian Ice retail locations in the State of Arizona. During the course of the negotiations, which extended through December 2014, Farace and Atrash requested and received due diligence information from Rita’s franchise development director and were repeatedly assured regarding the opportunity to develop those retail locations.

On December 5, 2014, Rita’s sent an Area Developer Opportunity Proposal to the plaintiffs. The proposal specifically provided that it was valid until December 20, 2014 and that it must be signed and the specified fees paid to Rita’s before December 29, 2014. Notwithstanding the time frame set forth in the proposal, on December 17, 2014, Rita’s franchise development director notified the plaintiffs that the company decided to award the franchise area development rights to a third party, the complaint states.

The complaint also alleges that, on December 19, 2014, the plaintiffs sent a written signed acceptance of the Area Developer Opportunity Proposal to Rita’s and requested information regarding bank details for the transfer of the specified fees required in the proposal. Rita’s did not respond to the plaintiffs’ acceptance and awarded the area development rights for the State of Arizona to a third party.

The plaintiffs allege that a contract was formed between them and the defendant for the franchise area development rights by virtue of their negotiations, the transmission of the Area Developer Opportunity Proposal, and the plaintiffs’ acceptance of the proposal within the specified time frame. The defendants breached the contract by awarding the developments rights to a third party, and the plaintiffs were damaged by the breach of contract, the plaintiffs claimed.

The lawsuit asserts claims of breach of contract and specific performance. The action seeks damages, pre-judgment interest, costs of suit, and any other just and proper relief.

The case is No. 2:15-cv-02450-GMS.

Attorneys: Richard H. Goldberg and Jeffrey S. Hunter (Renaud Cook Drury Mesaros, PA) for Anthony Farace and Francis Atrash.

Companies: Rita’s Water Ice Franchise Company

News: FranchisingDistribution ArizonaNews