Historical Review of Franchise Fees: Litigating the Franchise Fee Element in 2001

And the saga continues . . .

 

In Romeo Maintenance & Rental v. U-Haul Company of Minnesota, Bus. Franchise Guide (CCH) ¶ 12,259 (Minn. Dist. Ct. Feb. 13, 2001), plaintiff filed suit against defendant seeking a claim for relief under the Minnesota Franchise Act. Finding that plaintiff did not allege in the Complaint that it paid defendant a franchise fee, the court dismissed the Minnesota Franchise Act claim. Plaintiff then filed a motion for reconsideration.

 

The court noted on reconsideration that its previous order, finding no indirect franchise fee where plaintiff incurred expenses and paid defendant royalties as a “simple principle-agency relationship,” was an error. The court further stated that while ordinary business expenses are not considered a franchise fee, plaintiff’s required maintenance of dedicated phone lines and electronic databases that it would not have otherwise purchased “in the ordinary course of business as an independent truck rental business” might be sufficient to constitute an indirect franchise fee. As such, the court reversed its previous order granting defendant’s motion to dismiss the franchise act claim and reinstated it.

 

Takeaway: The court gave more breadth to the term “indirect franchise fee” for purposes of the Minnesota Franchise Act.

 

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