March 05, 2026|Franchise Frontlines
March 5, 2026 | Court of Appeals of Texas, Waco | Memorandum Opinion
Executive Summary
In a memorandum opinion, Justice Smith of the Texas Court of Appeals affirmed a trial court judgment in favor of franchisors Rainbow International, LLC and The Grounds Guys, LLC arising out of the termination of multiple franchise agreements. The franchisee argued that Michigan franchise law should apply and that certain alleged breaches were invalid due to lack of notice and opportunity to cure. The court rejected those arguments, holding that the franchisee failed to properly invoke Michigan law and therefore waived those protections. The court further concluded that sufficient evidence supported multiple independent grounds for termination under the franchise agreements, including reporting failures, failure to provide required financial statements, and impairment of goodwill, several of which permitted termination without an opportunity to cure.
Relevant Background
The dispute arose from a franchise relationship involving restoration and home services brands operating in Michigan. The franchisee operated multiple locations under franchise agreements that imposed ongoing obligations, including reporting requirements, payment of fees, provision of financial information, and compliance with system standards tied to brand relationships.
Following a period of what the court described as “contentious” communications, the franchisor issued notices of default and ultimately terminated the franchise agreements. The franchisor then pursued claims for breach of contract, asserting that the franchisee failed to comply with multiple operational and financial obligations and materially impaired system goodwill.
At trial, the franchisee argued that Michigan franchise law applied and provided additional protections, including limitations on termination and additional defenses. The franchisee also contended that certain alleged breaches were invalid because they were not preceded by notice and an opportunity to cure.
The trial court rejected those arguments and entered judgment for the franchisor. The franchisee appealed.
Decision
The Court of Appeals affirmed, placing significant emphasis on the franchisee’s failure to properly raise its choice-of-law arguments. The court held that the franchisee did not comply with the procedural requirements necessary to invoke Michigan law, including the failure to file a timely motion requesting application of foreign law or to properly present the issue to the trial court. As a result, the court concluded that any reliance on Michigan franchise protections was waived.
Turning to the merits, the court found legally and factually sufficient evidence to support the trial court’s determination that the franchisee breached the franchise agreements. The court identified multiple independent grounds for breach, including failure to timely submit required reports, failure to provide audited financial statements, and conduct that impaired the franchisor’s goodwill.
Importantly, the court emphasized that not all breaches required notice and an opportunity to cure under the agreements. Certain provisions expressly permitted termination without a cure period, including failures relating to reporting obligations and financial disclosures, as well as conduct materially affecting goodwill. The court concluded that these provisions were enforceable and that the evidence supported their application.
The court also rejected broader challenges to the sufficiency of the judgment, finding that even if some theories were disputed, other independent and legally sufficient grounds supported termination. Finally, the court declined to consider the franchisee’s affirmative defenses and counterclaims due to deficiencies in the appellate record.
Looking Forward
Although the decision does not break new doctrinal ground, it provides a clear reminder of how franchise disputes are often resolved in practice: through strict enforcement of contractual provisions and procedural discipline. For franchisors, the case reinforces the importance of drafting agreements that clearly identify which defaults permit immediate termination and which require notice and an opportunity to cure. Courts will enforce those distinctions where they are unambiguous.
Equally important is the court’s treatment of the franchisee’s attempt to rely on state franchise protections. The decision illustrates that such protections are not self-executing and must be properly invoked. Failure to comply with procedural requirements—particularly in multi-jurisdictional disputes—may result in waiver, even where the underlying law might otherwise provide substantive defenses. For franchisors, this underscores the value of carefully structured choice-of-law provisions and the strategic advantages that may flow from enforcing them.
The opinion also highlights the evidentiary realities of franchise litigation. Courts may rely on multiple independent grounds for breach, and a failure to defeat each ground can be dispositive. This reinforces the importance of developing a comprehensive enforcement record, particularly where termination is based on a combination of operational, financial, and system-impacting issues.
In sum, Cheyenne Partners is less about expanding franchise law and more about confirming its consistent application: franchise agreements will be enforced as written, procedural missteps can be outcome determinative, and courts will not hesitate to uphold termination decisions supported by multiple, contractually valid grounds.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
