Defendant manufactures a line of upscale sodas marketed under the name “Stewart’s.” Plaintiffs are several beverage distributors who distributed Defendant’s sodas in Minnesota. Plaintiffs were distributors of beer before Defendant approached them. Thus, Plaintiffs already owned the facilities (e.g., warehouses and refrigerators) and equipment (e.g., trucks and handcarts), and already employed the personnel (e.g., drivers, warehouse workers, and bookkeepers) necessary for the distribution of beverages at the time they began distributing Stewart’s sodas.
After several years of using Plaintiffs as its distributors, Defendant decided to distribute its products directly, and terminated Plaintiffs’ distribution agreements.
The Minnesota Franchise Act (MFA) protects franchisees from being terminated without good cause by franchisors. Defendant argues that it did not need “good cause” to terminate the Plaintiffs, however, because it was not a franchisor and Plaintiffs were not franchisees within the meaning of the MFA.
Plaintiffs argued that they were franchisees under the “business opportunity” provision of the MFA, which defines a “franchise” as: “the sale or lease of any products . to the purchaser . for the purpose of enabling the purchaser to start a business and in which the seller: . (iii) guarantees that the purchaser will derive income from the business which exceeds the price paid to the seller.”
How should the court rule on the Plaintiffs’ claim? What policy considerations support that outcome?