The High Court has found in favour of Supermac’s in a dispute over unpaid franchise fees from former restaurants on the Ennis Road and in Dooradoyle, Limerick, while rejecting a counterclaim by franchisee Watchford Limited for more than €716,000.
Watchford, controlled by John and Mary Lyons, operated the two Supermac’s franchises for many years. The Ennis Road restaurant opened in 1995 and paid a monthly fee equal to 10% of turnover net of VAT. No written franchise agreement was executed.
The central dispute was over what that 10% represented. Watchford argued that it consisted of a 7% franchise fee and separate 3% equipment fee intended to repay Supermac’s for fitting out and refurbishing the premises. Supermac’s maintained that the entire 10% was a single franchise fee reflecting its provision and upkeep of the premises.
Mr Justice David Keane accepted Supermac’s account. He found that invoices consistently described one undifferentiated fee and that Watchford’s audited accounts also treated it as a single payment. More importantly, John Lyons acknowledged there had never been an agreement that payments would fall to 7% once Supermac’s had recovered its fit-out costs.
Watchford nevertheless reduced its Ennis Road payments to 7% from August 2018 while continuing to trade as a Supermac’s franchise until August 2019. The court held that this breached the agreement: Watchford could not continue to take the benefit of the franchise while unilaterally withholding part of the agreed fee.
The court also rejected Watchford’s counterclaim for unjust enrichment, finding no legal basis for treating payments above Supermac’s actual refurbishment costs as overpayments.
Watchford did succeed on one accounting point. A €10,241.18 cheque it sent in April 2020 had been wrongly credited by Supermac’s to John and Mary Lyons personally and had to be deducted from the debt.
The judge therefore proposed judgment for Supermac’s of €96,263.84 plus statutory late-payment interest. Final orders and costs were left for a later hearing.