Franchise 101: A Franchisee’s Senior Moment; and TVPRA Liability for Franchisors
Franchisor 101: A Franchisee’s Senior Moment
A federal court in Illinois granted a franchisor’s motion for preliminary injunction against a former franchisee in California, accused of breaching post-termination obligations in a franchise agreement. Applying Illinois law, the court enforced the post-termination covenant not to compete with the franchisor.
Senior care service franchisor BrightStar Franchising, LLC (“BrightStar”) alleged that Foreside Management Company (“Foreside”), a former franchisee, violated its franchise agreement by launching a competing senior care business. BrightStar filed a motion to enjoin Foreside from continuing to operate their competing business and identifying themselves as a former franchisee, and from using BrightStar’s trademarks, proprietary programs, and confidential information.
Foreside argued that California law applied because the franchises were located in California, rendering the non-compete and non-solicitation provisions void under California law. The court first assessed the Illinois choice of law provision in the franchise agreement to determine whether a conflict between California and Illinois law existed.
The court ascertained no conflict and held that the Illinois choice of law provision applied. The court examined the 2020 California Supreme Court case Ixchel Pharma, LLC v. Biogen, Inc., which drew a distinction between the enforceability of non-competition agreements in employment and commercial settings. Applying Ixchel, the court noted that California law does not invalidate restraints on competition per se. Rather, Ixchel recognizes an exception for commercial dealings and relationships, which are to be evaluated under a reasonableness standard.
The court rejected Foreside’s argument that the franchise relationship with BrightStar was more like an employment one and applied the reasonableness standard. The court held Foreside was unable to show how the outcome would differ under California’s reasonableness standard from the application of Illinois’ standard and thus concluded the post-termination covenants were enforceable.
The court then addressed BrightStar’s request for preliminary injunction and found that BrightStar demonstrated a likelihood of success on most claims, holding that the 18-month and 25-mile radius restraints provisions were limited in scope and reasonably necessary to protect BrightStar’s goodwill, clientele, and confidential information.
The court also found sufficient evidence that Foreside was misusing customer information, telephone numbers, and proprietary programs that were outside the scope of California’s restriction on post-term noncompetition agreements. Importantly, the court balanced the hardships in BrightStar’s favor because Foreside’s harm was self-inflicted and avoidable.
Whether former franchisees will be enjoined from performing in their line of business can be heavily influenced by a choice-of-law analysis, as was the case here. But it is also a highly fact-driven inquiry. Perceptions that franchisees act improperly, for example, by using the franchisor’s proprietary information and secrets to support launching an independent operation, increase the likelihood that such conduct will be enjoined, even in the face of state policy against enforcing such covenants.
BrightStar Franchising, LLC v. Foreside Mgmt. Co., Case No. 1:25cv-08741 (N.D. Ill. Oct. 29, 2025)
Franchisee 101: TVPRA Liability for Franchisors
A Washington district court analyzed whether franchisor Wyndham Hotels & Resorts could be held vicariously liable under the Trafficking Victims Protection Reauthorization Act (“TVPRA”). The plaintiff alleged she was trafficked at several hotels operated by Wyndham franchisees. The court held the plaintiff’s allegations were not sufficient to support Wyndham’s direct liability under the TVPRA, but they could support a theory of vicarious liability or joint employer liability.
The TVPRA establishes both perpetrator and beneficiary liability. Wyndham contended that the complaint failed to plausibly allege Wyndham’s actual knowledge of any trafficking (perpetrator liability) or its agreement to the venture (beneficiary liability). In holding the plaintiff failed to allege direct perpetrator or beneficiary liability, the court distinguished between the alleged knowledge of the franchisee’s hotel staff and that of Wyndham itself.
While the plaintiff sufficiently alleged that hotel staff actually knew of her trafficking, there were no specific allegations tying Wyndham to such knowledge. General knowledge of trafficking in the hotel industry, as well as general oversight and adherence to brand standards, without more, did not satisfy the TVPRA’s knowledge requirement to support direct liability.
However, Wyndham could still be held vicariously liable under the TVPRA if one assumed the allegations were true. The court emphasized that principal-agent and joint employment relationships require the franchisor to exercise substantial control over the franchisee’s day-to-day operations, particularly with respect to the specific instrumentality that caused the plaintiff’s harm.
For example, the court found the plaintiff plausibly alleged the existence of an agency relation based on the allegation that Wyndham required its franchisees to use Wyndham’s software to manage reservations, payments, and crime data.
With respect to a joint employment theory, allegations that Wyndham established detailed job descriptions, set requirements for hiring, and oversaw employee discipline and terminations, and dictated the content of training provided by franchisees to hotel staff on the subject of crime and human trafficking were sufficient to show a joint employer relationship at the pleading stage.
Also significant was the allegation that Wyndham retained sole discretion to determine whether all training had been completed satisfactorily, which gave Wyndham a functional veto over employee hires.
On the other hand, the court held that plaintiff’s allegations that Wyndham conducted regular inspections of the franchisee’s hotel and had general knowledge of sex trafficking in the hotel industry were insufficient to establish that Wyndham controlled the franchisee’s daily operations to the degree necessary.
Franchisors are often brought into civil TVPRA cases when the franchisees are judgment-proof or unable to defend themselves. Given that franchisor oversight in the hospitality sector is more interconnected with day-to-day management and operations than other franchised business formats, the law exposes hotel franchisors to heightened risk of TVPRA liability. Franchisors should evaluate their systems and consult with counsel to structure their operations with such liability considerations in mind.
Doe v. G6 Hosp. Prop. LLC, Case No. 2:25-cv-00347-LK (W.D. Wash. Dec. 10, 2025).