Why Wendy's Is Suing One of Its Largest Franchisees After a franchisee refused to remodel and update its point-of-sale system, Wendy's decided it was time to take action.
By Kate Taylor
Opinions expressed by Entrepreneur contributors are their own.
Wendy's has some serious beef with its fourth-largest franchisee.
The burger chain filed a lawsuit in December to terminate its relationship with DavCo, which operates 152 Wendy's locations across Maryland, Virginia and Washington, D.C. According to the suit, DavCo has failed to meet two company-mandated requirements: installing a common point-of-sale (POS) computer platform and remodeling restaurants to Wendy's specifications.
"DavCo's conduct threatens to undermine the value and reputation of the Wendy's brand, including the business of other independent franchisees who invest the time and financial resources to stay competitive," states Wendy's in the complaint.
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The trouble started in 2012, when Wendy's rolled out Aloha, the only POS platform it has ever implemented systemwide. Wendy's required all company owned and franchised restaurants – with a few exceptions -- to register for Aloha by March 2014, a deadline that DavCo failed to meet.
The second strike against DavCo came in October 2014, when Wendy's set the goal of refurbishing at least 60 percent of all U.S. and Canadian restaurants to fit a sleeker model by 2020. DavCo refused to agree to update 10 percent of its restaurants per year for the next five years, despite corporate prodding to name the restaurants chosen for remodeling in 2015. According to Wendy's, DavCo's restaurants are in dire need of updating, which would make the remodeling job an expensive affair.
If Wendy's succeeds all DavCo-owned restaurants will have their franchise agreement terminated, and likely be sold or closed.
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