The Ontario Superior Court of Justice has granted an injunction against franchisees of in-home senior care franchise system Home Instead for violating their franchise agreements by operating multiple businesses without consent from the franchisor.
According to Adam Ship and Sarah Ahsan, lawyers at McCarthy and Tétrault LLP, the franchisees were allegedly operating two separate franchises in common ownership and breaching the terms of their franchise agreements. Home Instead’s policy requires franchisees to have established a lengthy record of strong performance before such consent is given. Not only were the franchisees violating this policy, but they were also operating a third business from their franchise office, which breached additional contractual terms.
The court stated the franchisees had a weak case against the allegations, particularly because of e-mails confirming their business relationships. The e-mails also showed they considered themselves co-owners of third-party suppliers and one of their significant others offered to buy out a share of the business. The franchisees also refused to produce their minute books and banking records. This is why, according to Ship and Ahsan, the court referred to the franchisees as ‘rogue.’
The court ruled if the franchisees continued to operate in breach of their contracts, irreparable harm would be caused to the franchisor’s goodwill and reputation in the marketplace and this outweighed the loss of dignity and emotional injury they were claiming they would suffer from termination. It granted an injunction in favour of the franchisor, which was under the good faith obligation of the Arthur Wishart (Franchise Disclosure, 2000) Act to enforce its system standards and denied the franchisees’ motion for an injunction preventing the termination.
For more on the case, click here.