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No Harm to Franchisees When Franchisor Acquires Competitor

By Griffith C. Towle

It is becoming increasingly common for franchise companies to acquire their competitors. Predictably, the franchisees of the acquired system often will feel threatened and take legal action.

In Hanson Hams, Inc. v. HBH Franchise Company, LLC, Bus. Fran. Guide (CCH) '13,093 (Dec. 20, 2004), the U.S. District Court, Southern District of Florida, recently considered such a case. In Hanson Hams, a Heavenly Ham franchisee filed a complaint against the franchisor of the HoneyBaked Ham franchise system for allegedly “unfair” conduct occurring after the defendant's subsidiary acquired the Heavenly Ham franchise system. Plaintiff alleged that after the acquisition, defendant favored the Honey-Baked Ham system over the Heavenly Ham system and that such disparate treatment violated Florida's “little FTC Act” (Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), Florida Statutes ”501.201, et seq.). In a thorough and well-reasoned decision, the court concluded that defendant's conduct was not unfair within the meaning of the FDUTPA as a matter of law. The court found it particularly telling that the plaintiff had not asserted any claim against its franchisor (a subsidiary of defendant).

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