Back
Find out how we are operating following the relaxation of COVID-19 restrictions I We’re here to help; contact us or read our legal insights
Get in Touch Menu

Chink in the armour:  the High Court highlights a flaw in franchise agreements

11 November 2011

Franchisees benefit from exploiting the franchised brand and they should act to uphold the brand’s reputation.  Equally, franchisors must ensure that their franchise agreements provide them with adequate recourse in the event a rogue franchisee acts in a way that may damage the brand.

The case of MMP v Antal 2011 highlights the importance of ensuring adequate provisions are in the franchise agreement, and that termination procedures are carried out correctly.

MMP (the franchisee) entered into a franchise agreement with Antal (the franchisor). An employee of MMP accessed information that was then used for improper purposes and Antal’s management feared damage to their brand. They terminated the agreement on the grounds that MMP had breached a ‘substantial term’ of the agreement not to ‘affect adversely (Antal’s) name, trade marks or other intellectual property’.

The court ruled that Antal had not brought enough evidence to show that the brand had been damaged. Antal had therefore wrongfully terminated the agreement. Although the court accepted that Antal’s fears of brand damage were genuine, this was not sufficient reason to terminate under the agreement as it was drafted.

Practically, it may be quite difficult to establish actual damage caused to a brand. Indeed, in this case, despite establishing the improper use of the information, the court was not satisfied that these actions necessarily caused damage. Since Antal had unlawfully terminated the agreement, they were liable to pay some damages to MMP.

Franchisors should carefully consider the terms of their agreements and ensure that these grant them the flexibility to take appropriate action to protect their brand. The outcome of this case may have been very different had there been provisions in the franchise agreement to enable Antal to terminate where they had a ‘reasonable belief’ that MMP had damaged the brand name.

If you need clear and pragmatic legal advice, we’re here to help so please get in touch.

Contact us

Contact
Chris Wills LLB (Hons)
Partner
View profile
Chris Wills
Related services
Share this article
Resources to help

Related articles

SCCs: New rules governing cross-border data transfers and data exchanges from the EU and EEA

GDPR & data protection

This September brings change to the use of standard contractual clauses (SCCs) governing data transfers from the EU and EEA. In June this year, the European Commission published two sets…

Kym Fletcher LLB (Hons) Euro
Consultant, solicitor

Top tips for improving wellbeing in the workplace

Commercial

The mental health charity Mind has developed a website, Mental Health at Work, offering a range of resources for employers and employees to help with issues such as work-related stress.…

Jenny Hawrot LLB (Hons)
Senior associate, solicitor

Catch up on our free legal webinars

Commercial

Our legal experts have been busy sharing valuable expertise in their first series of free webinars for employers, and businesses across the county who missed the live events can now…

Willans
Solicitors
Contact us