Franchisees sue on-line franchisor for competing with them

A majority of franchisees are seeking a court order from the Supreme Court in New York to stop The Knot from competing with them and to award monetary damages.

The lawsuit alleges that the franchisees paid for the exclusive right to use the “Weddingpages” name in their territories. When The Knot, a start-up company that markets to brides over the internet, purchased the franchisor of Weddingpages earlier this year, it required the franchisees to use “The Knot” name in addition to Weddingpages in their territories. However, it has since allegedly threatened to take away the right of franchisees to use “The Knot” name and to circumvent its agreements with franchisees by competing against them in their own territories.

The lawsuit contends that The Knot has committed fraud and misrepresentation; violation of state franchise registration and disclosure laws; breaches of the franchise agreements; violations of the implied covenant of good faith and fair dealing and other violations of franchise and state laws.

“The Knot's management has refused to acknowledge the franchisees' concerns or even meet with us. We had no choice but to file suit,” said Todd Kabes, one of the franchisees.

A lawyer for the franchisees said, “We are asking the court to protect the fundamental bargain that the franchisees made - that they would have exclusive rights to the Weddingpages and Knot names and concepts in their territories. The fact that The Knot bought out the franchisor does not change that.”

In a similar case last month, the same Minneapolis law firm representing the franchisees obtained an injunction against a franchisor's internet sales into franchisee territories.