Contributed by Tris Fall

For better or worse, not all franchises last forever.  For various reasons, a franchise relationship sometimes terminates – sometimes on amicable terms; other times, not so much.  Unless the franchisee is subject to a non-compete covenant, the franchisee often continues in the same business as the franchise operation, even after the franchise relationship has ended.  

And, not wanting to lose any customers, the former franchisee may seek to tread as closely as possible to the way things worked under the franchise.  It may try to continue to use the same color scheme, same manner of operations and even a similar name. Of course, the former franchisee has to do this without violating the franchisor’s intellectual property rights.  The tough question is how close is too close.  

A recent decision from the U.S. District Court for the Middle District of Florida sheds some light on this predicament.  In You Fit, Inc. v. Pleasanton Fitness, LLC, You Fit (the franchisor) had granted a franchise to the defendants (the franchisee) for the operation of a series of health clubs under the name "You Fit".  

For reasons unknown, the franchise relationship ended, but the defendants continued to operate health clubs.  Not wanting to violate You Fit’s trademark, but still wanting to retain their customer base, the defendants opted to do business as "Fit U" (ostensibly an abbreviation of "Fitness Unlimited").  As it turns out, this was a poor decision.   

You Fit sued in federal court for trademark infringement, unfair competition and related claims.  In evaluating the various factors that go into a "likelihood of confusion" (the test for trademark infringement), the court determined that the mark "YOU FIT" was suggestive, and therefore entitled to a heightened level of protection, even though the words "you" and "fit" were commonly used by others in the fitness market.  The court also decided that the marks "YOU FIT" and "FIT U" were "very similar", despite the fact that one was essentially a transposition of the other.  In evaluating the actual confusion factor, the court quoted a post from the popular website Yelp, in which a consumer stated that she was confused by the "Fit U" health club, noting that it shared a similar name and the "same basic color scheme" as did You Fit.  The Yelp post concluded with "Very confusing and a big let down."  

On balance, the court concluded that the plaintiff franchisor had satisfied that a likelihood of confusion existed between these two marks and ruled in favor of the franchisor.  The defendant former franchisee was enjoined from using the mark "FIT U" "or otherwise using ‘Fit ‘ in any manner in the offer, sale, or advertising of any goods or services".  

This case demonstrates that franchisors who are dissatisfied with the steps that a former franchisee has taken to distance itself from the franchise have a powerful means of enforcing their rights.  It also should serve as a cautionary tale to former franchisees who are trying to remain as close as possible to what they previously did as a franchisee.  In general, a former franchisee is best advised to distance itself from the franchise in every way that it can, so as to avoid an outcome like that suffered by in this case.