Spotlight on McDonald’s—Franchise Termination. J.C.,Inc., had a franchise agreement with McDonald’s Corp. to operateMcDonald’s restaurants in Lancaster, Ohio. The agreement requiredJ.C. to make monthly payments of certain percentages of gross salesto McDonald’s. If any payment was more than thirty days late,McDonald’s had the right to terminate the franchise. The agreementalso stated that even if McDonald’s accepted a late payment, thatwould not “constitute a waiver of any subsequent breach.” From timeto time, McDonald’s accepted J.C.’s late payments, but when J.C.defaulted on one particular payment, McDonald’s gave notice ofthirty days to comply or surrender possession of the restaurants.J.C. missed the deadline. McDonald’s demanded that J.C. vacate therestaurants, but J.C. refused. McDonald’s alleged that J.C. hadviolated the franchise agreement. J.C. claimed that McDonald’s hadbreached the implied covenant of good faith and fair dealing. Whichparty should prevail, and why?
