A California federal court denied Mountain Mike’s Pizza a temporary restraining order (“TRO”) against one of its franchisees who did not renew its franchise agreement and opened a new restaurant under a different name.

In response to franchisee’s notice of non-renewal, Mountain Mike’s notified the franchisee of its right to buy the franchised restaurant and assume the franchisee’s lease. Franchisee refused and signed an amendment to the lease to operate a pizza restaurant under the name, Viscuso’s Pizza and Draft House. Mountain Mike’s alleged franchisee used the brand’s goodwill to profit at its expense, and requested a TRO based on trademark infringement.

Mountain Mike’s provided evidence that franchisee advertised Viscuso’s on a third-party delivery app, while orders were picked up from the Mountain Mike’s still operating business. Viscuso’s online menu was copied directly from Mountain Mike’s menu, including product names, pizza sizes and descriptions. The delivery app said Viscuso’s was opening a month after the non-renewal notice.

Franchisee countered that it did not intend to operate the restaurant as a Mountain Mike’s after the franchise agreement ended. Franchisee stated the delivery app was not supposed to take effect until after the franchise agreement ended and it deactivated the app when the first app order as Viscuso’s was received. The franchisee claimed it deidentified Mountain Mike’s signage when requested.

A TRO will only issue if four elements are established by the plaintiff: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in its favor; and (4) an injunction is in the public interest.

The party seeking a TRO must establish it is likely to suffer irreparable harm in the absence of preliminary relief. The court held Mountain Mike’s could not prove it would suffer irreparable harm because the damage it claimed was in the past and did not show a substantial threat of future harm from the franchisee. The court noted Mountain Mike’s did not provide sufficient evidence to prove irreparable harm, and such harm is not inherent or presumed.

Franchisees may want to leave their franchise system at the end of the term and start their own business. This is especially true in California, given the public policy against enforcing non-compete agreements. A franchisee contemplating this course of action should consult franchise counsel to ensure it is not infringing franchisor’s marks and is abiding by post-expiration covenants.