Principe v. McDonald's Corp.

631 F.2d 303 (1980)

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Principe v. McDonald’s Corp.

United States Court of Appeals for the Fourth Circuit
631 F.2d 303 (1980)

KL

Facts

Frank and Ann Principe and their family-owned corporation Frankie, Inc. (collectively, Principe) (plaintiffs) were franchisees of McDonald’s Corp. (defendant). After McDonald’s refused Principe’s request to open a third franchise, Principe sued, alleging that McDonald’s had illegally tied franchise rights to store leases and a $15,000 security deposit. Principe argued for a narrow definition of the franchise arrangement, contending that only those components of the franchise that were linked in the public’s mind to the McDonald’s trademark should be included as part of the franchise package. As a result, Principe claimed that McDonald’s offered three distinct products to franchisees (the franchise, the building lease, and the security note), which should be separated. McDonald’s responded that it sold just one product and that the lease and security deposit were part of its overall franchise program, a comprehensive business strategy that included marketing, location research and scouting, planning and construction of each restaurant building, and management training and support of franchise owners and personnel, among other benefits. The district court found for McDonald’s on summary judgment, holding that there was no tying as a matter of law because McDonald’s sold just one product to Principe: the franchise relationship. The court concluded that the lease and security note were components of that overall franchise package. Principe appealed.

Rule of Law

Issue

Holding and Reasoning (Phillips, J)

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