Welcome to The Franchise Memorandum by Lathrop GPM. Below are summaries of recent legal developments of interest to franchisors.
Minnesota Federal Court Rules that Fraud and Misrepresentation Claims Against Franchise Broker Fail Because Alleged Misrepresentations Were Puffery -
A federal court in Minnesota dismissed all claims against a franchise broker because the plaintiff failed to demonstrate that the broker made false statements about past or present facts or circumstances. Mount Holly Kickboxing, LLC v. FranChoice, Inc., 2021 WL 117968 (D. Minn. Mar. 24, 2021). FranChoice was a franchise broker for the iLoveKickboxing.com (ILKB) franchise system and was involved in the sale of a franchise to the franchisee, Mount Holly. Mount Holly claimed that, during the sales process, FranChoice misrepresented whether the franchise was suitable for absentee or semi-absentee ownership, the estimated initial investment, the success of franchisees, and made financial performance representations that were not disclosed in ILKB’s FDD. Mount Holly brought claims against FranChoice for fraud and misrepresentation and violations of statutory franchise sales and deceptive practices acts.
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