As part of its franchise agreement, the Floral Delivery Company FDC) requires its franchisees to sell standard floral arrangements, in designs set forth in FDC catalogues, at prices set by FDC. FDC has discovered that Monica's Floral Delights, a FDC franchisee, is selling bouquets for prices below that approved by FDC, and is thus undercutting nearby franchisees and harming their business. This is a form of encroachment, and FDC may enforce the minimum pricing provisions provided they are set forth clearly in the franchise agreement.

Question

Quizplus · Accepted Answer

This is not “encroachment”; moreover, minimum price restraints are illegal per se because of the negative effect upon consumers, and so may not be enforced by franchisors, regardless of the terms of the franchise agreement.

As Part of Its Franchise Agreement, the Floral Delivery Company