Franchisee 101: An UnBakeable Non-Compete

Lewitt Hackman

A Minnesota federal court denied cookie dough franchisor Cookie Dough Bliss Franchising’s motion for a temporary restraining order and preliminary injunction against a former Minnesota franchisee and its owners.

The franchisee entered into a franchise agreement with the franchisor in November 2021 to operate a retail store and a food truck using the Cookie Dough Bliss marks and proprietary information. Both sides argued that the other did not perform their respective obligations under the franchise agreement, which resulted in the franchisor terminating the franchise agreement.

After termination, the franchisee opened a cookie dough business named “UnBakeable” in the same location as its former franchise, but with a rebranded food truck, new logo and updated social media.

Cookie Dough Bliss Franchising claimed the new UnBakeable logo was confusingly similar to their font and logo and that its former franchisee was continuing to use its trade secrets, including recipes. Cookie Dough Bliss Franchising also alleged the former franchisee breached its non-compete covenant in the franchise agreement, which prevented the franchisee from competing for two years within a 30 mile radius of the franchise location after termination of the franchise agreement. Cookie Dough Bliss filed a motion for a temporary restraining order and preliminary injunction against the former franchisee.

The court denied the franchisor’s motion. The court concluded Cookie Dough Bliss did not establish it would suffer irreparable harm because they were not currently registered to sell franchises in Minnesota; the franchisor’s own website continued to list the franchisee’s mobile unit; the risk of other franchisees not abiding by their non-compete covenants was speculative and there was no evidence that monetary damages were not sufficient.

The court also determined it was unclear the franchisor would succeed on the merits of enforcing the non-compete provision, which must serve a legitimate purpose and not be broader than necessary to protect such purpose under Minnesota law. The cited case law indicated 10 to 20 miles was a more standard radius for non-competes upheld in the state and if a franchisor cannot sell franchises in the state, then these restrictions might not be necessary.

As for the third factor, balance of harms, the court found the harm to the franchisor was uncertain but the harm to the franchisee was to be put out of business. The court found the last factor, public interest neutral.

After a franchise agreement ends or is terminated, franchisees that obtained experience in their franchise industry often want to start a competing business. Franchisees nearing the end of their franchise term should seek counsel to determine the enforceability of post-term non-compete and other restrictive covenants prior to competing with a former franchisor.

Cookie Dough Bliss Franchising, LLC v. Feed Your Soul Minn., LLC, 2023 U.S. Dist. LEXIS 132808 (D. Minn. Aug. 1, 2023).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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