A federal court in Tennessee held a Gus’s World Famous Fried Chicken former franchisee in contempt for failure to deidentify its restaurant after entry of a temporary restraining order and consent to a permanent injunction.
The franchisee operated a Gus’s fried chicken franchise until the franchise agreement was terminated in May 2020. The franchisor moved for a Temporary Restraining Order (TRO), which the court granted. The parties then entered into a permanent injunction, which prohibited the franchisee from operating a Gus’s restaurant and using Gus’s proprietary information. But, the franchisee continued to operate as a Gus’s restaurant and use Gus’s proprietary information.
The franchisor moved for contempt, showing use of Gus’s marks and trade dress inside and outside the restaurant. The franchisor alleged that Gus’s handbooks were still in the restaurant, and that the restaurant continued using Gus’s fried chicken batter. The franchisee admitted the restaurant still displayed a Gus’s sign. However, the franchisee claimed this continued use was based on advice from his lawyer that it was best for the restaurant and its employees to stay open during the COVID-19 shutdowns.
The court rejected the franchisee’s argument, finding the COVID-19 pandemic did not excuse the franchisee from complying with the TRO and permanent injunction. The court found the franchisee in contempt and set a hearing to determine sanctions to be imposed.
While many businesses are struggling to stay open during the COVID-19 pandemic, the crisis does not let anyone ignore a court’s orders. Franchisees with struggling businesses should consult counsel to determine the best strategy for themselves and their businesses in this difficult time.
