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Dunkin’ Donuts Incorporated v. Dough Boy Management, Inc.

2006 WL 20521 (U.S. Dist. Ct. D. N.J. 2006) (Unpublished)

FRANCHISES—The New Jersey Franchise Practices Act does not require proof of damages to establish a violation; rather, one need only demonstrate that the franchise was terminated without good cause.

A franchisor sued to terminate four franchises based on the franchisee’s failure to abide by franchise requirements. The franchisee filed counterclaims for breach of contract and for breach of the covenant of fair dealing. The franchisee also claimed that its franchises were wrongfully terminated without cause in violation of the New Jersey Franchise Practices Act. The franchisor responded that its franchisee failed to accurately report gross sales, failed to maintain proper health standards, and was operating two locations without franchise agreements. Its notices provided that if the franchisee contested the termination, the agreements would remain in place until the termination was validated by a court. During discovery, the franchisee only provided speculative damage claims, stating that it “suffered significant damages (i.e., millions of dollars)” in lost profits and lost business opportunities. The franchisor moved to dismiss the complaint. The Court noted that in order to defeat a summary judgment motion, one must provide specific evidence of record that supports the claim and upon which a verdict could be reached. A claim cannot be based on a vague argument. It also pointed out that the breach of contract and fair dealing claims were dependent on the franchisee’s ability to prove damages. Finding that the franchisee’s proof of damages was merely speculative and unsupported, the Court dismissed the counterclaims. It did not, however, dismiss the claim for violation of the New Jersey Franchise Practices Act. In that regard, it held that the Act does not require proof of damages in order to establish a violation of the Act. Rather, one need only demonstrate that the franchise was terminated without good cause.


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