Eggspectations inc. c. 9157-6561 Québec inc., EYB 2008-149899 (confirmed by the Court of Appeal in 9157-6561 Québec Inc. v. Eggspectations Inc., 2009 QCCA 324)
The franchisor and the franchisee entered into a franchise agreement in 2005. Eggspectations Inc. sought the issuance of a safeguard order because the franchisee had failed to respect the standards pertaining to the quality of customer service and cleanliness, as well as the terms of the franchise agreement with respect to the operations of the restaurant.
The franchisor claimed that it would suffer irreparable harm if the franchisee’s behaviour was allowed to continue. The Court noted that the franchisor had a clear right stemming from the franchise agreement. Poor customer service, lack of cleanliness and lack of management are all likely to cause a serious risk of irreparable harm to the franchisor’s reputation and name, and could further cause financial losses if the situation persisted. The Court concluded that there is an urgency to act when a franchisor is faced with a franchisee who refuses to operate his restaurant in accordance with the terms of the franchise agreement. The safeguard order was granted, and the franchisee was ordered to deposit, either into court or into an interest-bearing trust account managed by the franchisor's attorneys, 50% of the on-going amounts claimed by the franchisor until the final judgment is rendered. However, the Court did not allow the franchisor’s claim for amounts owed by the franchisee.