19 Franchise L.J. 1 (1999-2000)

handle is hein.journals/fchlj19 and id is 1 raw text is: FRANCHISE
LAw JoURiAL
AMERICAN  BAR  ASSOCIATION

QUARTERLY JOURNAL OF THE FORUM ON FRANCHISING

VOLUME 19, NUMBER I  SUMMER 1999

The Sounds of Silence in the
Franchise Agreement
ROBERT ZARCO AND LAWRENCE V. ASHE

ranchisors and franchisees
alike suffer frequently from
sleepless nights, not because
of what a franchise agreement
states, but because of what it does
not say. Their greatest concern
stems from the landmark opinion
of a now-retired Florida district
court judge in the case of Scheck
v. Burger King Corporation.' In
that case, Burger King had
allowed the conversion of an          RobertZarco
existing Howard Johnson's restau-
rant site to a Burger King restau-
rant just two miles away from
Scheck's restaurant in Lee,
Massachusetts. The new Burger
King   was located between
Scheck's and the major source of
its clientele, Route 93. Just before
the case settled, the court held
that the express disavowal of an
exclusive territory to Scheck did
not necessarily create a new right
on Burger King's behalf-the         Lawrence V. Ashe
right to open additional units at
will regardless of their effect on Scheck's operations.2 The
court specifically held that if Burger King had wanted to
place a competing unit at a location of its choice, it must
clearly so state and expressly reserve the right to place a
competing unit nearby. Until recently, franchisee advocates
proudly displayed their coat of arms-the implied covenant
of good faith and fair dealing, symbolized by the Scheck
decision.
The Eleventh Circuit, in the hotel encroachment case of
Robert Zarco is the principal shareholder and founding partner of the
law firm, Zarco & Pardo, P.A., in Miami, Florida. Lawrence V. Ashe is
a partner of the firm. The authors acknowledge and appreciate the
research assistance of Jeanne-Marie Waldman.

Camp Creek Hospitality Inns, Inc. v. Sheraton Franchise
Corp., referred to Scheck as the seminal case in this line
but acknowledged that courts had distinguished, criticized,
and ignored the decision in subsequent opinions.3 In Camp
Creek, the Eleventh Circuit attempted to decipher the code
by sorting the implied covenant encroachment cases into two
groups: (1) when the parties include contract language on the
issue of competing franchises, the implied covenant will not
defeat those terms; and (2) when there is no such language,
the franchisor may not capitalize upon the franchisee's busi-
ness in bad faith.4 That division mirrors the oft-quoted
Scheck philosophy that denial of an exclusive territorial
interest to [the franchisee] does not necessarily imply a
wholly different right to [the franchisor]-the right to open
other proximate franchises at will regardless of their effect
on the Plaintiff's operations.5 Despite its resemblance to
(continued on page 25)
In This Issue
TheiSoinds ofSilece in the Franchise A ment. 1  .I
ROBERT ZARCO AND LAWRENCE V. As~u
When Shouild a Confidentiality Agrement
Contain a Time Limit9 ......................... 3
LINDA, K. SmLvENS
Mecineke Revisited: The Specter of Individual Liability. .... 6
RICHiARD M. ASBILL AND W. ANDRIw SCOrr-1
Reducing Legal Risk and Avoiding Emnploymnent
Discrimination Claims .......................... 9
BEVERL.Y BRYAN SWALLOW'S
Franchising Bookshelf ........................... 20
DAv t) A. BEYER
Franchising Currents............................ 29
KENNE.TH R. COS FELLo0, BE.NJAMIN A. LEVIN, AND
MICHAEL J. LOCKE;RBY

QUARTERLY JOURNAL OF THE FORUM ON FRANCHISING

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