Irreparable Harm Kneaded: British Columbia Court Declines To Grant An Injunction Against Former Freshslice Franchisees

• Published date: 24 May 2022
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Franchising
• Law Firm: Cassels
• Author: Ms Danielle DiPardo

The enforcement of non-competition provisions in franchise agreements is a controversial legal issue that is often reliant on the unique facts and evidence of each dispute and the contracts between the franchise parties. For example, as discussed in our previous newsletter, the British Columbia Court of Appeal recently upheld the enforcement of a non-competition provision in its decision in Garcha Brothers Meat Shop Ltd. v. Singh.¹ However, in RFSP Equipment v Singh,² the Supreme Court of British Columbia declined to order an injunction against several former franchisees of a pizza chain that had rebranded en masse and continued to operate.

In Singh, the Court heard two applications in two separate actions for interlocutory injunctions restraining the defendants (former franchisees of Freshslice Pizza (Freshslice)) from operating pizza restaurants at various locations. The restaurants had been operating as franchises of Freshslice and then, overnight, rebranded as either HellCrust Pizza or Yummy Slice Pizza. The rebranding consisted of the following: removing all Freshslice marks; replacement of Freshslice dough purchased from other suppliers; changing of telephone numbers; cessation of use of Freshslice social media accounts, introduction of a new menu; and, implementation of a new point of sale system. Immediately after rebranding, the defendants delivered a notice of rescission, and Freshslice subsequently filed for interlocutory injunctions.

Freshslice argued that the rebranding was contrary to and in breach of various franchise agreements and their restrictive covenants. On the other hand, the defendants alleged that Freshslice repudiated the various franchise agreements, that they accepted the repudiation and the agreements were thereby brought to an end. The defendants also denied any use of confidential information, denied the restrictive covenants were reasonable, denied that consumers could be confused by the rebranding, and denied that Freshslice had suffered irreparable harm, among other things.

The franchise agreements contained the following restrictive covenants: (a) the franchisees were prohibited from being involved in a business that is similar to or competitive with Freshslice during the term of the agreement; (b) the franchisees were prohibited from being involved in a business that is similar to or competitive with Freshslice either at the franchised location or within 5km of any Freshslice restaurant for a period of two years from...