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Dunkin' Donuts franchisees complain about bad locations

Franchises with locations in California are generally subject to franchise agreements that govern all facets of the franchise business. When franchisees enter into a contract with a franchisor one of the typical clauses will govern whether the franchisee has a right to bring a business litigation against the franchisor.

If the franchisee is not able to otherwise negotiate out of such a clause, can such a clause govern and take precedence, meaning that a franchisee is then left without recourse if they believe that they are the victim of a business tort?

That is at least one of the questions now before a judge in a lawsuit involving a business dispute between a Dunkin' Donuts franchisee and the parent company.

Dunkin' Donuts coffee is sold throughout the state of California, and the state is eagerly awaiting the expansion of the franchise throughout the state. In the meantime, those considering opening a Dunkin' Donuts franchise in California may be weary considering alleged problems that other franchisees have experienced when opening up new business locations in their area.

Two of these franchisees have filed a class action lawsuit against Dunkin' Donuts surrounding the commercial real estate of the venues that they now operate. These business owners believe that they were the subjects of racial discrimination when they were being steered towards commercial real estate in less than desirable locations because of their race. These operators believe that Dunkin' Donuts made false representations claiming that better locations were unavailable.

Since that lawsuit was filed, Dunkin' Donuts has moved to dismiss the lawsuit on two grounds. One is that the statute of limitations has passed because the allegations concern events that took place more than seven years ago. The second ground for dismissal is that the franchise agreement prohibits a franchisee from filing a business litigation against the parent company.

Will a judge decide to move forward with this business lawsuit, or will the charges against Dunkin' Donuts be dismissed?

Source: New York Post, "Dunkin' seeks escape from hot water," Mark Decambre, Dec. 17, 2012

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