Historical Review of Franchise Fees: Litigating the Franchise Fee Element in 2004

And the saga continues . . .

 

In Home Pest & Termite Control, Inc. v. Dow Agrosciences, LLC, No. 8:02CV406, 2004 WL 240556, at *1 (D. Neb. Feb. 6, 2004), a trained pest control operator (“plaintiff”) filed suit against the manufacturer of a termite elimination system (“defendant”) after the manufacturer terminated the agreement between the parties. After plaintiff alleged violations of the Nebraska Franchise Practices Act, defendant moved for summary judgment on the basis that the agreement between the parties was not a franchise agreement. In support of this, defendant pointed to the following section of the agreement “[t]his Agreement is not, nor is it to be construed as, a franchise agreement.”

 

Although the agreement contemplated “a community of interest in the marketing” of the pest control system, thereby seemingly satisfying part of the definition of a franchise under the statute, the court ultimately rendered the relationship not a franchise because the Agreement “nowhere required [plaintiff] to pay a franchise fee in exchange for a license to use the [defendant’s] name or mark. None of the fees mentioned in the agreement are for a surety bond or deposit or for security; rather, they are connected to the purchase of the termite system components.”

 

Takeaway: Payments primarily for the purchase of components, rather than for the license to use a name or mark, have not been found to satisfy the franchise fee element of the Nebraska Franchise Practices Act.

 

*NOTICE: This blog is intended solely for informational purposes and should not be construed as providing legal advice. Please feel free to contact us with any questions you may have regarding this blog post.