Travelodge Hotels, Inc. v. Honeysuckle Enterprises., Inc.
In Travelodge Hotels, Inc. v. Honeysuckle Enterprises., Inc., 2005 WL 356958 (D.N.J.), the plaintiff, franchisor Travelodge Hotels, Inc. sued the defendant, franchisee Honeysuckle Enterprises, to collect liquidated damages and unpaid royalties under the License Agreement between Travelodge and Honeysuckle.
The franchisee argued that the franchisor fraudulently induced him into entered into the license agreement by telling him, among other things, that by being part of the Travelodge reservation system, his reservations would increase by at least fifteen percent. The franchisee also argued that, after entering into the license agreement, he was not put onto the reservation system so the franchisor breached the license agreement.
The franchisor argued that the evidence relating to any discussions between the franchisor and the franchisee prior to entering into the license agreement are barred by the parol evidence rule.
The Franchisor’s motion for summary judgment was denied, with the court finding that the parol evidence rule did not bar evidence revealing that the license agreement was fraudulently induced or materially breached by the franchisor.
This case reminds franchisors that disclaimer language in the franchise agreement will not protect them from sloppy sales techniques. Franchisors should be weary of making any specific earnings statements or guarantees, since franchisees could use those statements against the franchisors to make an argument to get out of an unsuccessful franchise.