Franchising News

Former Red Robin Franchisee In Legal Trouble For Violating Franchise Agreement

Written by Tim Morral
Published: 8/23/2012

After failing to make royalty payments, a Red Robin franchise in Texas is being sued for continuing to use branded logos and goods inside the store.

The strength of an established brand is one of the benefits of buying into a franchise business model. But what happens to the business's materials after the franchisee exits the franchise? As one restaurant owner in Texas is discovering, permission to use the brand and even in-store brand design elements end at the same time as the legal relationship.

Red Robin Franchisee Sued - Franchising Lawsuits

According to the Amarilo Globe News, a former Red Robin franchisee in Amarillo is being sued by the franchisor for failing to cease the use of Red Robin's branded materials. Since being legally ordered to stop using the Red Robin name and logo, the business owner, Early Bird Amarillo OPS4, covered exterior signage with blue tarps. But reports indicate that the business has continued to use the Red Robin logo, décor, seasoning and other branded content inside the store.

The issue boils down to the franchise agreement and franchisors' right to limit who can use a brand in a business context. Although it appears Early Bird and its principal, Bryan Cumby, may be intentionally violating the franchise agreement, one of the most common franchising mistakes entrepreneurs make is to overlook the stipulations contained in the franchise agreement, especially those that relate to the authorized use of the brand.

To avoided unintended consequences, prospective franchisees and their attorneys should carefully review the franchise agreement before their initial commitment and prior to severing the franchise relationship.

For now, Early Bird is under a temporary restraining order that prohibits them from disclosing the franchisor's proprietary information, and requires them to eliminate identifying Red Robin references at the store and online.

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