Franchise Talk

Company can’t enforce two rules used to strip owner of restaurants

July 10th, 2007 | Author: Jack

A COBB COUNTY judge has held that two rules the Atlanta Bread Co. cited to strip a franchisee of five restaurants were unenforceable and cleared the way for a trial on other issues that could cost the company $16 million.

Judge Dorothy A. Robinson of Cobb County Superior Court last month granted partial summary judgment to the ex-franchisee, Sean Lupton-Smith, who lost his franchises when he opened a PJ’s Coffee & Lounge at Atlantic Station. He won on claims that Atlanta Bread could not enforce rules prohibiting him from working in a “baker/deli business” or opening a similar venture within 20 miles of an Atlanta Bread Co. location.

“If Plaintiff Lupton-Smith were to take a position of janitor in a deli, he would be in violation” of the first restriction, wrote Robinson, who nixed the second reason by noting that courts have held territorial restrictions unenforceable if they are subject to change through no action of the franchisee.

But Robinson found that a trial was needed to decide whether Lupton-Smith disclosed trade secrets and whether Atlanta Bread wrongfully terminated the franchise agreement.

“We have already filed our notice of appeal,” said James P. P. Dirr, Atlanta Bread Co.’s vice president and group general counsel. He declined to discuss the specifics of the case but said that since coming aboard with the company about a year, this is first such dispute he has seen.

Lupton-Smith’s attorney, Kilpatrick Stockton partner R. Randy Edwards, said he has advised his client not to discuss the case, but he was willing to give his side of the story.

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