Court Watch

In December 2008, the District Court for the City and County of Denver, CO, found that a sandwich shop franchisor's actions were wrongful and therefore constituted a breach of the franchise agreement when the franchisor purportedly terminated the agreement of a franchisee who, according to the franchisor's test, had failed to use the required amount of meat to make a single sandwich ordered and inspected by the franchisor's “mystery shopper.” The court found that the franchisor's quality-control test was inherently unreliable for multiple reasons and that the franchisor had wrongfully treated this franchisee differently from other franchisees who had failed the same test; therefore, the franchisor's decision to terminate the franchise agreement on the basis of that test violated the franchisor's obligation to act reasonably when exercising its discretion in determining (as permitted by the terms of the franchise agreement) whether the franchisee's actions had materially impaired the goodwill associated with the franchisor's trademarks. Quiznos Franchising II, LLC v. Zig Zag Restaurant Group, LLC, Case No. 06CV10765 (Colo. Dist. Ct. Dec. 31, 2008).