Franchise restraints: Since when did a pizza menu become confidential??
We recently defended an injunction application in the NSW Supreme Court brought against our client for an alleged breach of a Pizza Capers franchise agreement.
Brasam Pty Ltd was a former Pizza Capers franchisee and the franchisor sought to restrain our client from operating an independent pizza business and allegedly using the franchisor's confidential menu information.
In handing down its judgment, the Court applied the usual well-known test in determining applications for interlocutory relief.
Briefly stated: the plaintiff must show there is a serious question of law or fact to be tried as to the plaintiff's entitlement to the relief sought. The plaintiff must also show it is likely to suffer injury for which damages will not be an adequate remedy and that the balance of convenience favours granting of an injunction.
The onus at common law in maintaining a restraint turns upon the reasonableness of such a clause. Gleeson CJ, as he then was, in Wright v Gasweld Pty Limited (1991) 22 NSWLR 317 at 329 said:
“An employer is not entitled to protect himself against mere competition by a former employee, and the corollary of that is that the employee is entitled to use skill, experience and know-how acquired in the service of the former employer in legitimate competition.”
The franchisor sought to argue that the clause in question was a clause which prevented mere competition and this did not sit well with the Court:
“that a clause which prevents mere competition is enforceable - [is] a proposition I cannot embrace.”
Frankly, we failed to understand what was confidential about a publicly available menu. And so did the Court:
“the Plaintiff has had some difficulty in identifying precisely what is confidential about the menu. In my view, the reason for this is because the menu is not confidential. The menu is open to the public via the internet or perhaps printed matter, and it is there for the very good purpose of inviting and indeed enticing the public to purchase a Pizza Capers' pizzas. More to the point, in every single case there is a considerable amount of detail disclosed as to the ingredients, albeit no detail as to the precise amount of each of the ingredients.”
[We would like to note our appreciation for the expertise of our client's Counsel, Dilan Mahendra, in this proceeding.]