A Florida federal court refused to dismiss a franchisor's claim for past due royalties and lost future profits.

The case concerned an Interim Healthcare staffing franchise in Arizona. The franchisor issued a default notice based on the franchisee's failure to pay agreed royalties. After the franchisee failed to cure the default, the franchisor terminated the franchise agreement and sued for almost $400,000 in past due royalties and more than $1,400,000 in lost future royalties.

The franchisee moved to dismiss the claim for future royalties, arguing that future amounts were speculative and that the franchisor's act of terminating the agreement-rather than the franchisee's breach - caused any alleged future royalty damages.

The court rejected this argument, noting that although Florida courts are "hesitant" to award future royalties, the franchisor properly pled its claim by alleging breach of the franchise agreement, lost profits as a proximate result of the breach, that losses were contemplated by the parties based on the agreement's ten-year term, and that the claimed losses were not speculative as they were based on average weekly fees and number of weeks remaining on the agreement. The court noted that future profits can be recovered in Florida by demonstrating the loss with "reasonable certainty by competent proof" and that the franchisor would be held to that standard at trial.

Lost future royalties may be difficult to recover, but a properly detailed pleading can get the claim to trial rather than being dismissed early in the case. Franchisors should work closely with franchise litigation attorneys to strengthen the pleading of such claims.

Interim Healthcare Inc. v. Health Care@home, LLC, S.D. Fla.