The Franchise Memorandum

The United States District Court District for the District of Utah has granted a franchisor’s preliminary injunction motion to enjoin a derogatory website, even though the actual website operator had not signed the franchise agreement enforced by the court.  Homeworx Franchising, LLC v. Meadows, 2009 WL 211918 (D. Utah Jan. 26, 2009). The franchise agreement involved in this case precluded any unauthorized use of the franchisor’s trademarks and any business or marketing practice injurious to the franchisor’s business and goodwill associated with franchisor’s marks.

The defendant website operator refused to take down the site, arguing that he was not bound by the terms of the franchise agreement because the franchise agreement was signed by another individual. The contract, however, referenced the website operator by name as a franchisee.  Further, the website operator had testified that he was involved with the franchised business as a manager and was also a business partner of the individual who signed the franchise agreement. As a result, the court held the website operator was bound by the terms of the franchise agreement because the evidence clearly demonstrated he was in fact a franchisee, either as a partner or a joint venturer. 

The defendants then argued that even if the website operator was bound by the franchise agreement, the agreement itself would infringe on his First Amendment rights. The court disagreed, finding that the defendants voluntarily surrendered some of their rights when they entered into the franchise agreement. The court cited language from a prior case that “[t]he forum for protecting [their] free speech rights was the bargaining table, not the courtroom.”