In a precedent setting decision rendered earlier this month in a California court, noted franchisee attorney Robert Zarco (Zarco Einhorn, Salkowski & Brito, P.A.) won a significant jury verdict against franchisor El Pollo Loco, Inc. that the company breached the implied covenant of food faith and fair dealing by failing to offer new encroaching restaurants to the existing franchisee. Of particular note, the presiding judge ruled that the express contractual provisions upon which El Pollo Loco relied (‘reservation of rights’ clause in the Franchise Agreement) was “unconscionable as a matter of law, and thus unenforceable”! As to particulars, plaintiffs Michael & Janice Bryman, owned one El Pollo Loco restaurant in Lancaster, CA since 1999 when the company had designated the entire Los Angeles DMA as a corporate market. Notwithstanding, it hadn’t made any efforts to develop new stores in Lancaster for 15 years. After it went public however in 2014, El Pollo Loco aggressively grew the brand and used its real-time knowledge of the Bryman’s gross sales to determine where to best develop two additional corporate units. After a 4-week trial, the 12-member jury found that the franchisor improperly encroached on the non-exclusive territory of its nearby franchisee. The monetary and equitable damages for which El Pollo Loco will be responsible (anticipated to be several millions of dollars) will be determined at a hearing to be held in early 2018. We will look to get more information on this major development from Attorney Zarco in the weeks and months ahead.