The Franchise Memorandum

A federal court in Ohio granted in part, and denied in part, a motion for summary judgment filed by hotel franchisor Red Roof Franchising, LLC on certain breach of contract and other claims that Red Roof filed against a former franchisee. Red Roof Franchising, LLC v. Riverside Macon Group, LLC, 2020 WL 2494462 (S.D. Ohio May 14, 2020). Red Roof terminated its franchise agreement with Riverside because the franchisee had failed to pay certain fees when due and failed to make required improvements to the premises of the franchised hotel. Riverside continued to operate the franchised hotel after receiving Red Roof’s notice of termination. Red Roof responded by filing a suit that alleged trademark infringement, breach of contract, and unjust enrichment, among other claims, and sought a temporary restraining order and an injunction. Riverside filed counterclaims alleging that Red Roof committed breach of contract, fraudulent misrepresentation, fraudulent concealment, tortious interference with business relationship, and civil conspiracy, among other claims. Red Roof moved for summary judgment on some of its claims, including its breach of contract claim, and all of Riverside’s counterclaims.

With regard to its contractual counterclaims, Riverside specifically argued that Red Roof breached the parties’ franchise agreement when it terminated Riverside's access to Red Roof’s reservation system without giving Riverside an opportunity to cure its defaults. The court agreed that the relevant provisions of the Franchise Agreement — which it described as “poorly drafted” — seemed to require Red Roof to provide Riverside time to cure before it could rescind access to the reservation system. Thus, the court denied summary judgment on that counterclaim. The court also looked closely at the language of the franchise agreement to find that the force majeure clause did not automatically give Riverside additional time to complete the required improvements, but rather required Red Roof to expressly consent to an extension of time. So the court granted summary judgment on that claim. Finally, the court declined to conclude that Red Roof had agreed to modify its contract to provide Riverside with additional time for the improvements and granted summary judgment on that claim as well. Red Roof’s motion for summary judgment was granted in part, and denied in part, on the remaining claims.