The Franchise Memorandum

In Singas Famous Pizza Brands Corp. v. New York Advertising LLC, 2011 U.S. Dist. LEXIS 14524 (S.D.N.Y. Feb. 14, 2011), the court granted franchisor Singas a preliminary injunction to prevent its franchisee from running two competing businesses in violation of an in-term and post-term covenant not to compete. This case arose when the franchisee’s husband started a business called Queens New York Famous Pizza, in which the franchisee participated. In holding that the standards for an injunction were met, the court cited the fact that the Queens restaurant provided nearly identical products and used a nearly identical menu to that of a Singas franchise. Its operations also were similar, including the use of machetes to cut the pizzas and specially designed Singas’ pans. Furthermore, the franchisee and her husband promoted their businesses in joint advertisements, and the franchisee assisted in the operations of the Queens restaurant. The court found that the noncompete covenant was reasonable as it only covered an area within a ten-mile radius of the terminated franchise for a period of two years.