Welcome to The Franchise Memorandum by Lathrop GPM. Below are summaries of recent legal developments of interest to franchisors.
Post-Termination Injunction: Noncompete Covenants -
California Federal Court Enforces Noncompete Against Former Franchisee -
A federal court in California granted a franchisor’s motion for a preliminary injunction against a former franchisee alleged to have misappropriated trade secrets and breached a noncompetition provision related to the continued operation of a formerly franchised restaurant. Bambu Franchising, LLC v. Nguyen, 2021 WL 1839664 (N.D. Cal. May 7, 2021). Bambu licenses the operation of restaurants that sell Vietnamese beverages utilizing confidential recipes. After the sale of Bambu to the current owner, the original owner, Jenny Nguyen and her company Bambu Delight Hostetter, Inc., continued to operate a Bambu location under the terms of a franchise agreement. Nguyen ultimately, without the approval of Bambu, transferred management of her franchise to Phu Tien Vu. After Bambu decided not to renew the Hostetter franchise agreement, Vu’s company, Lyche, Inc., began operating the location as a competing store. Bambu filed suit and sought an injunction against Nguyen, Hostetter, Vu, and Lyche, alleging trade secret misappropriation and violations of the noncompetition provision in the franchise agreement.
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