United States District Court, D. Massachusetts
FINDINGS OF FACT, RULINGS OF LAW, &
WILLIAM G. YOUNG DISTRICT JUDGE.
action for declaratory relief, the Association of Independent
BR Franchise Owners (the “Association”) seeks a
judgment that franchisor Baskin Robbins Franchising, LLC
(“Baskin”) has no contractual right to charge its
franchisees a “Commercial Factor Fee.” The
parties have now filed cross-motions for summary judgment,
Pl. Association Independent BR Franchise Owners Mem. Law.
Supp. Mot. Summ. J. (“Pl.'s Mem.”), ECF No.
56; Pl.'s Mem. Points and Authorities Resp. Mot. Summ. J.
(“Pl.'s Opp'n”), ECF No. 65; Pl.
Association Independent BR Franchise Owners Reply Supp. Mot.
Summ. J. (“Pl.'s Reply”), ECF No. 73; Mem.
Def. Baskin-Robbins Franchising LLC Supp. Mot. Summ. J.
(“Def.'s Mem.”), ECF No. 53; Mem. Def.
Baskin-Robbins Franchising LLC Opp'n Mot. Pl. Association
Independent BR Franchise Owners Summ. J. (“Def.'s
Opp'n”), ECF No. 64; Reply Mem. Def. Baskin-Robbins
Franchising LLC Supp. Mot. Summ. J. (“Def.'s
Reply”), ECF No. 72, and accompanying statements of
fact, Pl. Association Independent BR Franchise Owners
Statement Undisputed Material Facts (“Pl.'s
Facts”), ECF No. 57; Def. Baskin-Robbins Franchising
LLC's Statement Material Facts (“Def.'s
Facts”), ECF No. 54. By agreement of the parties, this
Court held a case stated hearing on June 9, 2017, Electronic
Clerk's Notes, ECF No. 74, and here issues findings of
fact and rulings of law.
FINDINGS OF FACT
is a Delaware limited liability company with its principal
place of business in Canton, Massachusetts. Def.'s Facts
¶ 1. For over fifty years, Baskin has licensed
independent business owners to operate ice cream shops that
use the Baskin Robbins trademark and sell Baskin's
proprietary ice cream and related products. Id.
¶ 4. Members of the Association are standalone
franchisees that collectively own eighty-four Baskin Robbins
stores. Compl. ¶¶ 15-16.
to 1998, Baskin franchisees either paid no royalty fees or
paid a small percentage of “Continuing Franchise
Fees” (0.5%), and purchased the vast majority of their
ice cream products from Baskin or an affiliate. Pl.'s
Facts ¶¶ 1-2. As a result, Baskin derived its
primary revenue from the sale of ice cream products.
Id. In 1998, Baskin offered its franchisees a
“Royalty Conversion Program” that: 1) raised or
imposed for the first time a Continuing Franchise Fee of
4.9%; 2) raised the advertising fee paid by the franchisee to
5.0%; 3) lowered the costs for ice cream products and other
goods; and 4) charged a “Commercial Factor” on
ice cream and other products. Id. ¶ 3. The vast
majority of then existing franchisees accepted the terms of
the program, and executed conversion agreements that included
terms requiring franchisees to pay to Baskin a
“Commercial Factor” on its ice cream and related
products. Id. ¶ 6. Today, the number of
franchisees remaining subject to these conversion agreements
is close to zero. Id.
in 2000, new and renewing franchisees have entered into a
franchise agreement (which the Association refers to as the
“Current Franchise Agreement”) that does not
contain the terms “Commercial Factor” or
“Commercial Factor Fee.” Id. ¶ 9.
Also in 2000, Baskin ceased production of ice cream,
outsourcing the manufacture and wholesale distribution of its
proprietary products to Dean Foods, a dairy vendor designated
by Baskin. Def.'s Facts ¶ 6. Pursuant to the Current
Franchise Agreement (“Agreement”), franchisees
must purchase all of their ice cream and related products
from Dean Foods. Id. ¶ 9. Dean Foods pays a fee
to Baskin based on the volume of Dean Foods's sales of
certain products to Baskin franchisees. Id. ¶
7. This basic arrangement has been in effect for
approximately sixteen years. Id. ¶ 11.
Foods charges Baskin franchisees a “Commercial
Factor” on products. Id. ¶ 9. In 2016,
franchisees paid a commercial factor of $1.26 per tub of ice
cream, and $6.52 per case of Pastry Pride Non-Dairy Whip
Topping. Pl.'s Facts ¶¶ 12-13.
Agreement contains an integration and merger clause, which
provides that the Agreement can only be modified by a writing
signed by the parties. Pl.'s Facts ¶ 18. For
example, the 2000 Agreement contains a clause that states:
This Agreement, and the documents referred to herein shall be
the entire, full and complete agreement between FRANCHISOR
and FRANCHISEE concerning the subject matter hereof, and
supersedes all prior agreements, no other representation
having induced FRANCHISEE to execute this Agreement; and
there are no representations, inducements, promises or
agreements, oral or otherwise, between the parties not
embodied herein, which are of any force or effect with
reference to this Agreement or otherwise. No amendment,
change or variance from this Agreement shall be binding on
either party unless executed in writing.
Id., Ex. 3, Baskin-Robbins 2000 Franchise Agreement,
BASKIN0000910, ECF No. 57-3.
RULINGS OF LAW
issue before the Court is the interpretation of the Current
Franchise Agreement. The Association views the dispute
fundamentally as concerning the scope of contractually
permissible fees, contending that because the fully
integrated franchise agreements do not include a
“Commercial Factor Fee” as part of the
Agreement's fee provisions, franchisees have no
contractual obligation to pay such fees. Pl.'s Opp'n
12-13. On the other hand, Baskin frames the dispute as one
concerning product pricing, arguing that the Commercial
Factor is simply a franchise fee charged to Dean Foods, that
Dean Foods then passes on to the purchasers of their
products, the franchisees. Def.'s Mem. 1-2. The Court
begins with the proper characterization of the Commercial
Factor, then examines the relevant provisions of the
Agreement and the parties' course of dealing.