How does the litigation described in Item 3 potentially affect the ability of a Dq Treat franchisee to divide their territory as mentioned in the litigation?
Dq_Treat Franchise · 2025 FDDAnswer from 2025 FDD Document
igation**
Pending Cases
Oakland Family Restaurants, Inc. and Lake Area Restaurants, Inc. v. American Dairy Queen Corporation (United States District Court, Eastern District of Michigan, Southern Division, #2:21-cv-12539-TGB-EAS, filed October 28, 2021). Plaintiffs, Dairy Queen® franchisees, initiated this litigation seeking a declaratory judgment that ADQ must allow them to divide their respective territories and assign their existing 1965 agreement to multiple transferees, each for a separate portion of their territory, rather than requiring each transferee to sign ADQ's current form of franchise agreement. Additionally, Plaintiffs claimed breach of contract resulting in monetary damages, promissory estoppel, attorney's fees and costs. On March 31, 2024, the court ruled in favor of ADQ and against Plaintiffs on all claims. Plaintiffs filed a Notice of Appeal on April 18, 2024, and oral argument was held on January 28, 2025. On March 12, 2025, the United States Court of Appeals for the Sixth Circuit issued Judgement affirming the district court's grant of summary judgement in favor of ADQ. The Sixth Circuit opined that, among other things, ADQ had good cause for conditioning consent to transfer on prospective franchisees' execution of a new agreement, ADQ did not breach its agreement with Plaintiffs and Plaintiffs were not entitled to
declaratory relief. On March 25, 2025, Plaintiffs filed a Petition for Panel Rehearing and Petition for En Banc Rehearing.
2-MNA, LLC vs.
What This Means (2025 FDD)
According to Dq Treat's 2025 Franchise Disclosure Document, Item 3 describes a concluded case that directly impacts a franchisee's ability to divide their territory. The case, Oakland Family Restaurants, Inc. and Lake Area Restaurants, Inc. v. American Dairy Queen Corporation, involved franchisees seeking a declaratory judgment to allow them to divide their territories and assign their 1965 agreement to multiple transferees for separate portions of their territory. The franchisees wanted to avoid signing Dq Treat's current franchise agreement for each transferee. The court ruled in favor of Dq Treat, and this ruling was affirmed by the United States Court of Appeals for the Sixth Circuit on March 12, 2025. The court found that Dq Treat had good cause to require prospective franchisees to execute a new agreement as a condition of consent to transfer, and that Dq Treat did not breach its agreement with the Plaintiffs.
This litigation clarifies Dq Treat's right to require new franchisees to sign the current franchise agreement when a territory is transferred or divided. For a prospective Dq Treat franchisee, this means that if they were to acquire a portion of an existing territory, Dq Treat could require them to sign the current franchise agreement rather than honoring the terms of the older agreement. This could impact the financial terms, operational requirements, and other obligations of the franchisee.
The franchisees who brought the suit filed a Petition for Panel Rehearing and Petition for En Banc Rehearing on March 25, 2025, but the prior ruling stands. This case confirms Dq Treat's control over the terms under which franchise territories can be divided and transferred, potentially affecting the value and flexibility of existing territorial agreements.