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GA SUPREME COURT AGREES TO HEAR IMPORTANT FRANCHISE CASE

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

WASHINGTON, DC, Oct. 8, 2008—The Georgia Supreme Court this week said that it has agreed to review the appellate court decision in the case of Atlanta Bread Company v. Sean Lupton Smith, et al, which is what the International Franchise Association (IFA) requested of the court this summer.

“The IFA filed an amicus brief in July urging the Georgia Supreme Court to take this case and consider whether the Georgia Court of Appeals erred in crafting a novel interpretation of the reasonableness standard for in-term covenants not to compete,” said David French, IFA vice president of Government Relations.  “We are pleased that the court will hear oral arguments in this case in January 2009.” 

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.

In a statement, the Court noted that it is particularly concerned with the following: Did the court of appeals err in holding that under Jackson & Coker v. Hart, 261 GA 371 (1991), the reasonableness standard applicable to post-termination restrictive covenants also applies to in-term restrictive covenants?  And, did the court of appeals err in applying to in-term restrictive covenants in franchise agreements the rule against allowing the blue-pencil doctrine of severability?

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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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