March 03, 2026|Franchise Frontlines
March 3, 2026 | United States District Court for the Middle District of Tennessee | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Eli Richardson of the Middle District of Tennessee denied a franchisor’s request for a preliminary injunction seeking to enforce post-termination non-competition covenants contained in franchise agreements. Showhomes Franchise Company alleged that its former franchisees were operating a competing home staging and interior design business within the same territory after the termination of their franchise agreements. The franchisor argued that this conduct violated the agreements’ post-termination non-compete provisions and threatened the integrity of the franchise system. The defendants disputed the claims and opposed injunctive relief. Although the court assumed for purposes of the motion that a breach of the non-compete provisions may have occurred, it concluded that the franchisor failed to demonstrate the likelihood of irreparable harm required for preliminary injunctive relief. The court therefore denied the requested injunction.
Relevant Background
Showhomes Franchise Company licenses independent operators to provide home staging, interior design, and related services under the SHOWHOMES® brand. The company entered into two franchise agreements with the defendants, who operated Showhomes franchise territories in the Philadelphia area.
The first franchise agreement was executed in October 2013 and granted the defendants the right to operate a Showhomes business for an initial ten-year term, with options to renew. A second agreement was executed in March 2016 through an affiliated entity owned by the same franchise operators. Both agreements contained post-termination non-competition provisions that restricted franchisees from owning, operating, or participating in a competing business offering similar services within the franchise territory or within a specified radius of that territory for two years following termination or expiration of the agreement.
According to the franchisor, the defendants continued operating under the agreements after the first franchise term expired. In late 2024, the franchisor purported to terminate the relationship. The franchisor later concluded that the defendants had begun operating a competing staging and design business that allegedly used the experience, training, and customer relationships developed through the franchise system.
The franchisor asserted that the defendants were continuing to offer staging and design services within the same geographic areas as their former franchises and were diverting business from the Showhomes system. Based on these allegations, the franchisor sought a preliminary injunction preventing the defendants from continuing the competing business.
Decision
The court denied the motion for a preliminary injunction.
Under federal law, a party seeking a preliminary injunction must demonstrate four elements: a likelihood of success on the merits, a likelihood of irreparable harm absent an injunction, that the balance of equities favors the movant, and that the injunction serves the public interest.
The court focused its analysis on the requirement of irreparable harm and concluded that the franchisor failed to meet its burden.
The court acknowledged that, in franchise cases, courts often recognize that unfair competition and the loss of customer goodwill may constitute irreparable harm. Courts have also noted that allowing former franchisees to disregard post-termination non-competition covenants could undermine the integrity of a franchise system.
However, the court emphasized that such harm must be supported by evidence showing that it is likely to occur. General assertions that competition could damage a franchise system are not sufficient to justify preliminary injunctive relief.
In this case, the franchisor relied primarily on generalized statements that the defendants’ competing business threatened customer relationships, goodwill, and the franchisor’s ability to re-franchise the territory. The court concluded that these assertions were not supported by concrete evidence.
The franchisor did not identify specific customers who had been lost, instances of consumer confusion, or measurable harm to the brand. Nor did the record demonstrate that the defendants’ conduct posed an imminent threat to the franchisor’s business model or system integrity.
Because the court determined that the franchisor failed to establish the likelihood of irreparable harm, it declined to analyze the remaining preliminary injunction factors. The motion for a preliminary injunction was therefore denied.
Looking Forward
This decision highlights a recurring issue in franchise litigation: the evidentiary burden franchisors must satisfy when seeking emergency injunctive relief to enforce post-termination restrictive covenants.
Courts frequently acknowledge that competition by former franchisees can threaten customer relationships, goodwill, and system stability. At the same time, the decision underscores that franchisors must present concrete evidence demonstrating that such harm is likely and imminent.
For franchisors seeking injunctive relief, the case illustrates the importance of developing an evidentiary record showing specific impacts from the alleged competitive activity. Evidence such as diverted customers, confusion in the marketplace, measurable loss of goodwill, or threats to the franchisor’s ability to operate or re-franchise a territory can strengthen the case for emergency relief.
The ruling also reflects a broader principle in franchise disputes: even where contractual non-competition provisions exist, courts often require more than the mere allegation of a breach to justify extraordinary remedies such as preliminary injunctions. Careful documentation of competitive harm and customer impact can therefore play an important role in franchise enforcement actions.
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 Shareholder 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.
