Franchise Renewal Provision Upheld in Favor of Franchisor

A California appellate court found that the former franchisor of Mail Boxes, Etc. (MBE) stores and its parent company, United Parcel Service (UPS), did not breach the renewal provision in a franchise agreement by requiring the franchisee to renew its MBE franchise on the same terms and conditions as contained in the current franchise agreement for the sale of The UPS Store franchises.

While the provision at issue specifically provided for renewal of the agreement “on the same terms and conditions as are contained in the then current Franchise Agreement for the sale of new MBE Centers,” the court refused to interpret the language literally, noting that such interpretation would result in an existing franchisee having no rights of renewal at all since the franchisor no longer sold new MBE Centers. Instead, the court held that the franchisor could renew the franchise agreement on the same terms and conditions contained in the then current franchise agreement for The UPS Store franchises.

G.I. McDouglas, Inc. v. Mail Boxes Etc., Inc., Cal. Ct. App. No. B226112, January 12, 2012.

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