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IFA OUTLINES DANGER OF GEORGIA COURT RULING ON IN-TERM COVENANTS

For immediate release
Contact: Alisa Harrison, 202-628-8000

Files Friend of the Court Brief in Georgia Supreme Court

WASHINGTON, DC, July 21, 2008—The International Franchise Association (IFA)  has filed an amicus (friend of the court) brief in the case of Atlanta Bread Company International, Inc. v. Sean Lupton-Smith to help the Georgia Supreme Court understand the importance of this case to the franchise business model in Georgia.

“The case presents an important opportunity for the franchise community to clarify Georgia law on the nature and scope of in-term covenants, which ensure that all franchisees are aligned with the marketing and operational plans of the franchise system,” said David French, IFA vice president of Government Relations.  “Franchisors need assurance that they will be able to protect and maintain their trademark, trade name, confidential information, methods of operation and goodwill, among other things, during the term of the franchise relationship. Franchisees share an interest in knowing that fellow franchise operators will not be branching off into competing businesses.”

The lawsuit involves in-term, non-compete restrictions in an Atlanta Bread Company (ABC) franchise agreement.  At the trial level, the court applied a very strict standard to in-term covenants and ruled that the ABC non-compete was unenforceable. The Georgia Court of Appeals affirmed the trial court’s ruling. IFA believes that the lower courts erred in evaluating the in-term restrictions under standards more appropriately applied to post-term limits.

This case is important to preserving the franchise model, French said, because the lower court’s ruling, if allowed to remain as is, could render unenforceable the in-term restrictive covenants in the vast majority of franchise contracts for businesses operated in Georgia, including many of the most well-known and respected franchises in the world.

On July 15, 2008, ABC filed a Petition for Certiorari with the Georgia Supreme Court, asking for review of the Court of Appeals’ decision.  Lupton –Smith is expected to file an opposition brief by Aug. 4, 2008. IFA’s July 18 amicus encourages the Court to grant ABC’s Petition.  There is no deadline for the Court to decide.

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About The International Franchise Association 
The International Franchise Association, the world’s oldest and largest organization representing franchising, is the preeminent voice and acknowledged leader for the industry worldwide. Approaching a half-century of service with a growing membership of more than 1,300 franchise systems, 10,000-plus franchisees and more than 500 firms that supply goods and services to the industry, IFA protects, enhances and promotes franchising by advancing the values of integrity, respect, trust, commitment to excellence, honesty and diversity. For more information, visit the IFA Web site www.franchise.org.


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