Franchisor 101: My Dog Ate My Franchise Agreement

Lewitt Hackman

A Louisiana appellate court affirmed a trial court’s finding that there was a signed franchise agreement between the parties even though the franchisor could not produce the signed original.

Brooke and Michael Hyde decided to franchise their snowball business, Miss Bee’s Snoworld. Kaci Guidry expressed interest in the franchise opportunity. Guidry received the completed Franchise Disclosure Document (FDD). Guidry claimed she never signed the franchise agreement. Brooke Hyde claimed she (Brooke) received a signed copy of the franchise agreement and stored it in a filing cabinet. The relationship broke down, and the file, with the signed franchise agreement, was allegedly taken by Guidry’s sister. Soon, Guidry and her sister opened a competing snowball business at the location originally proposed for the franchised business.

The franchisor sued Guidry for unlawful use and disclosure of confidential information and breach of contract. The trial court ruled in favor of the franchisor, even though the franchisor could not produce the signed franchise agreement. The court concluded that other evidence, including testimony, could prove the existence of a contract if the original was lost, stolen, or destroyed.

The franchisor introduced an unsigned copy of the franchise agreement and related documents it alleged were executed by the parties. An employee of the franchisor testified she saw the fully signed copy of the franchise agreement and that the contract in evidence was the same as the one signed by the parties. The trial court found the testimony satisfactory to determine Guidry signed the franchise agreement; that her sister took the agreement; and that Guidry’s operation of a competing business was a breach of contract and unlawful use and disclosure of confidential information. The appellate court agreed, and held the trial court had a reasonable factual basis to find the parties executed the franchise agreement and that the original was lost, destroyed, or stolen.

A robust electronic document management system is vital for franchisors. While the franchise agreement was found valid and enforceable in this case, the franchisor could have avoided the headache of litigating the existence of a valid agreement if it had an electronic copy of the signed franchise agreement.

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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