Three Picurro Pizzeria franchisees filed suit this week seeking to dissolve their franchise agreements after Peter Picurro, the founder of Arizona's Picurro Pizzeria franchised restaurant chain, was arrested on August 21 and accused of luring a minor for sexual exploitation based on communications he had on the Internet with an undercover police detective posing as a 14-year-old girl. According to one local news source, since Picurro's arrest, the franchisees have experienced a sharp decline in sales, some as much as 40%. While franchise agreements often permit the franchisor to terminate the relationship if its franchisee engages in conduct that harms the reputation of the franchise name, it is unclear whether franchisees have the same right when the franchisor's conduct is at issue. In their lawsuit, the franchisees rely on provisions in the franchise agreements requiring them to possess "good moral character and reputation" and forbidding franchisees who commit a felony, fraud or any acts that adversely affects the goodwill of the Picurro name from operating a franchise. The franchisees argue that these provisions, although geared towards franchisees, should apply equally to Picurro.
Posted by franchiselawblog at September 9, 2005 04:28 PM