Read the Fine Print

This story appears in the March 1999 issue of Entrepreneur. Subscribe »

Contracts are a tricky business: One poorly written phrase can a lawsuit make. Just ask the claimants of Mermaid Marketing Inc. v. Esberg Corp.

In early 1998, Steve L. Smith, whose corporate entity, Esberg Corp., owned three Mermaid carwash franchises in Minnesota, wanted to buy a nonfranchised car wash in Bloomington, Minnesota. Madison, Wisconsin-based Mermaid denied consent, claiming proprietary trade secrets would be at risk. Smith fought Mermaid's refusal, citing his franchise agreement, which allows franchisees to operate nonfranchised car washes with consent, which Mermaid can't "unreasonably withhold."

After much litigation, an appellate court found the case would be better settled in a trial court. A trial date is expected to be set later this year.

"Many lawsuits turn on the specific language of the franchise agreement," says Barry M. Heller, a partner with the Washington, DC, franchise law firm Rudnick, Wolfe, Epstien & Zeidman. It's crucial to examine, question and understand every word of the franchise agreement to avoid misunderstandings.

Contact Source

Rudnick, Wolfe, Epstien, & Zeidman, (202) 712-7243, barry.heller@rudnickwolfe.com