High court dispute over Yorkshire tutoring company

TUTORING company Kip McGrath has won a dispute against a former franchisee who set up a rival business in Huddersfield.

Kip McGrath obtained a High Court judgement preventing the former franchisee in question operating a competing tuition centre pending a trial.

Karen Goode entered into an agreement with Kip McGrath in July 2013 giving her rights to take over an existing Kip McGrath education centre in Denby Dale, Huddersfield for a period of five years.

Restrictive covenants in the agreement prohibited her from setting up in competition with the firm for 12 months following her termination in the Huddersfield area.

She sought to terminate the franchise on the basis of alleged breaches by Kip McGrath, which the company “strenuously” denies.

The company said she continued to trade from the tuition centre, with the same students, merely replacing the Kip McGrath signs with those of her new business Huddersfield Education Hub.

The case has now been settled with the franchisee agreeing to pay undisclosed damages.

The team at Manchester law firm Pannone Corporate represented Kip McGrath in a claim over the breach of its restrictive covenants.

Kip McGrath was established in 1974 and now has a network of more than 540 centres in 20 countries worldwide.

Sarah Bazaraa, an associate at Pannone Corporate: “This is an excellent outcome for Kip McGrath. It also serves as a warning to franchisees who, after benefiting from an established brand, believe they can disregard the franchise agreement and simply set up in competition”.

“Franchisors facing this problem should always consider an interim injunction. Often it is the only viable option because restrictive covenants may have expired before a trial date. Franchisors should note that it is important to act quickly in this type of situation as any delay may be a bar to the grant of an interim injunction.

“Applications for interim injunctions are not without risk. An injunction could be overturned at trial – leaving the franchisor having to pay damages to the franchisee for lost business during the restraint period.

“However, this case demonstrates the courts are sympathetic to restrictive covenants and are prepared to grant interim injunctions to help protect the brands and reputations of franchisors.”

Jackie Burrows, the chief executive of Kip McGrath’s UK business said: “It is unfortunate that we needed to issue this claim. We do not take the decision to sue former franchisees lightly. However, we have no choice but to enforce our franchise agreements to protect the Kip McGrath brand and the interests of our franchise network.

“We are pleased that the court has recognised Kip McGrath’s commercial interests and the need to enforce restrictive covenants through the grant of this interim injunction.”