March 02, 2026|Franchise Frontlines
March 2, 2026 | United States District Court for the Western District of Virginia | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Jasmine H. Yoon of the United States District Court for the Western District of Virginia addressed counterclaims brought by franchisor Window Gang, LLC against one of its franchisees and the franchisee’s owner. The dispute arose after the franchisee allegedly stopped reporting revenue and paying royalties and began operating a competing exterior cleaning business within the franchise’s protected territory. The franchisor asserted counterclaims for breach of the franchise agreement, unjust enrichment, quantum meruit, and violations of federal and state trade secret laws. The franchisee moved to dismiss several of those claims. The court granted the motion in part and denied it in part, holding that some of the franchisor’s alleged trade secrets were described too generally to qualify for protection while allowing other claims—particularly those relating to a pricing formula and centralized lead system—to proceed.
Relevant Background
Window Gang operates a nationwide franchising network for exterior cleaning services. The system licenses franchisees to operate using Window Gang’s brand, service methods, and proprietary operating procedures. Franchisees agree to operate within defined territories and to follow specifications outlined in the franchisor’s confidential operations manual. The system also includes centralized resources such as a call center that gathers potential customer leads and routes them to franchisees in specific service areas.
In May 2024, the individual defendant executed a franchise agreement granting him the right to operate a Window Gang franchise in a protected territory covering Murfreesboro, Tennessee and surrounding areas. Shortly thereafter, the franchisee assigned the agreement to his newly formed company, Willett Exterior Services LLC, while personally guaranteeing the entity’s obligations under the agreement.
According to the franchisor’s counterclaims, the franchisee later stopped reporting revenue information and paying royalties as required under the agreement. The franchisor also alleged that the franchisee created and operated a competing exterior cleaning business within the protected territory. The franchisor further claimed that the franchisee diverted potential customers from the Window Gang system to the competing company and used confidential system information to develop the competing business.
The franchisee moved to dismiss several of the franchisor’s counterclaims, including claims for unjust enrichment, quantum meruit, and trade secret misappropriation.
Decision
The court addressed the challenged claims in three primary areas.
First, the court considered whether the franchisor could assert unjust enrichment and quantum meruit claims even though a written franchise agreement governed the parties’ relationship. Under Virginia law, quasi-contract claims generally cannot coexist with an enforceable written contract covering the same subject matter. However, the court explained that such claims may be pleaded in the alternative when the validity or enforceability of the underlying contract is disputed. Because the franchisee’s complaint sought rescission of the franchise agreement and argued that it was void, the court held that the franchisor could pursue quasi-contract claims at this stage of the litigation.
Second, the court analyzed the franchisor’s trade secret claims under both the Defend Trade Secrets Act and the Virginia Uniform Trade Secrets Act. To survive a motion to dismiss, a plaintiff must identify the alleged trade secrets with sufficient specificity and plausibly allege that they derive independent economic value from being kept secret.
The franchisor alleged that several categories of information constituted trade secrets, including specialized marketing materials, a confidential brand operations manual, a flat-rate job pricing formula, and a proprietary call center lead-tracking system.
The court concluded that some of these categories were described too broadly to qualify as trade secrets at the pleading stage. In particular, the court dismissed claims based on the franchisor’s marketing strategies and brand standards manual because the counterclaims did not provide sufficient factual detail about the content of those materials or why they were not readily ascertainable in the industry.
By contrast, the court allowed the claims based on the pricing formula and call center system to proceed. The franchisor alleged that its pricing model had been developed using more than a decade of commercial data and allowed franchisees to generate flat-rate bids that produced higher profit margins than traditional time-and-materials pricing. The court held that these allegations were sufficient to plausibly establish the existence of a protectable trade secret.
Similarly, the court found that the franchisor plausibly alleged trade secret protection for its centralized call center and lead-generation system. According to the counterclaims, the call center collected customer information and distributed qualified leads to franchisees within designated territories, providing a competitive advantage within the franchisor’s network.
Finally, the court denied the franchisor’s request for preliminary injunctive relief. Although the franchisor argued that the franchisee’s conduct threatened irreparable harm, the court concluded that the franchisor had not shown that such harm was likely or that monetary damages would be inadequate.
Looking Forward
This decision illustrates several issues that frequently arise in franchise disputes involving alleged competitive activity and misuse of system information.
First, the ruling highlights the importance of describing trade secrets with sufficient specificity when pursuing trade secret claims. Courts are increasingly reluctant to treat broad categories of operational information—such as general marketing strategies or operational manuals—as trade secrets unless the claimant identifies specific confidential components and explains how they derive economic value from secrecy.
Second, the decision underscores that certain components of franchise systems may be more likely to qualify for trade secret protection when they involve specialized data analysis or proprietary operational systems. Pricing algorithms, bidding formulas, and centralized lead-generation systems can often satisfy the requirements for trade secret protection if they are developed through substantial investment and maintained through confidentiality agreements.
Finally, the case reflects the practical realities of franchise enforcement disputes. Allegations that franchisees operate competing businesses, divert system leads, or misuse confidential information remain a common source of litigation within franchise systems. Clear contractual restrictions, carefully defined confidentiality provisions, and well-documented system processes can play an important role in protecting franchisor interests when such disputes arise.
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.
