Franchise business operations are heavily governed by rules. These rules make it possible to both protect and share the intellectual property of the central business’s marks. When the rules are violated, the mutual commercial relationship breaks down.
In Seattle, WA, several rogue Little Caesar franchises continue to serve and deliver pizza and chicken wings – after their franchise agreement was terminated in July of 2021.
Little Caesar Enterprises and LC Trademarks, Inc. have sued for trademark infringement, trade dress infringement, and breach of contract. The defendants are a collection of smaller corporations, LLCs, and individuals: Gurmoh, Inc., ABW Foods LLC, and a few other business people.
Why Did the Little Caesar’s Enterprises Terminate the Agreement?
In franchise ownership, you owe certain financial responsibilities to the central corporation. LC Trademarks, Inc., requires regular fiscal reports from its franchisees. In exchange, each franchise reaps the benefits of the Little Caesar’s business model and well-known commercial marks.
Gurmoh has not delivered these statements since late 2019. In April of 2021, Little Caesar warned Gurmoh that they needed to turn over the missing statements, or their franchise agreement would end. Later that year, after more silence, Little Caesar ended the relationship.
How Does Trademark Enter this Situation?
Businesses work hard to build the substance and reputation behind their marks. Using a trademark without permission:
- Creates confusion
- Dilutes the meaning of the mark
- Might harm (or at least alter) the reputation of the business
One primary asset that central corporations offer to franchises: Use of their trademarks. The recognition of that mark is an almost guaranteed way to get customers in the door. The franchise agreement puts this mark-sharing on the right side of the law.
Gurmoh’s continued operation of the pizza shops after the agreement was broken, which means they committed trademark infringement.
It is anyone’s guess as to why these Little Caesar locations strayed so far; perhaps they no longer want to share a slice of their profits with the Big Caesar. If you are a franchisee and are having problems complying with the franchise agreement, take the time to discuss your issues with a franchise and/or intellectual property lawyer. You might save yourself from a major headache and lawsuit.