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Hooter and Hoot Owl entered into a 20 year contract franchise agreement in May 1996, but this might end soon if the court rules to terminate it. The two are now entangled in a lawsuit.
In June, Hoot Owl Restaurant was sued by Hooters of America when the former supposedly failed to pass routine health inspections in its establishments in Delaware, Pennsylvania, and New Jersey. The parent company says that the franchise operator was inflicting serious damage to the brand. As any form of branding is very important to a companym you want to avoid anything negative at all costs.
Before the lawsuit began, Hoot Own had a dozen Hooters operating in the Northeast but four of them closed which prompted the parent company to take serious action.
Just recently, another restaurant in New Jersey closed down. The branch reportedly failed a food safety test which was conducted by an independent inspector from the parent company. According to the report, the restaurant had standing pools of water and plumbing problems among other things. The Hoot Owl restaurant in question closed the next day after the inspection without the knowledge of the parent company. The parent company on the other hand says that this was a breach of contract. Hoot Owl tried to defend their actions in court by saying that they were forced to close the restaurant because they were having a dispute with the landlord.
However, their Warwick branch clearly showed that the franchisee was not following standard operating procedures. Inspectors discovered that mouse droppings were in the bar area as well as on the shelf where to-go containers were being stored. They also found that the walk-in refrigerator was in a terrible condition.
It may be a while before the court rules in favor on either of the parties involved, but those who are in the franchise business could learn a lesson or two from this incident. First, be sure that franchisees stick to standard operating procedures. Second, conduct inspections regularly. Third, training is a must.