Hard Rock International Prevails in Landmark Termination Case Against Mexican Hard Rock Cafe Franchisee
ORLANDO, Fla. and MEXICO CITY, Dec. 9, 2013 /PRNewswire/ -- Hard Rock International has terminated its franchise relationship with Operadora DB Mexico, S.A. de C.V., Hard Rock Cafe franchisee in Mexico, after several years of disputes relating to non-compliance with franchise standards and franchise payment obligations. The termination follows the successful outcome of arbitrations in Mexico and final adjudication by Mexican arbitrators under the oversight of the International Chamber of Commerce ("ICC") in Paris.
In 2001 Robert Earl, owner of the twice bankrupt Planet Hollywood chain, acquired controlling interest in Grupo ECE Mexico, S.A. de C.V., and its subsidiary Operadora DB Mexico, S.A. de C.V.
Over the last decade, Operadora DB Mexico, S.A. de C.V. locations throughout Mexico have deteriorated dramatically and subsequently defaulted on obligations under the master franchise agreement. The franchisee frequently failed to pay merchandise vendors and landlords, did not upkeep Hard Rock Cafe quality standards and defaulted on its obligations to pay royalty payments to Hard Rock International. There have been additional issues regarding the scope of the use of the brand permitted for the franchisee.
Prior to the current ICC ruling, Hard Rock International engaged in arbitration in 2008. The ICC rendered final judgments, determining the limited scope of rights provided under the Hard Rock Cafe master franchise agreement and confirmed that Hard Rock International could continue its successful brand expansion into luxury hotels in Mexico, which had previously been challenged by Operadora DB Mexico, S.A. de C.V.
In 2011, following numerous years of perpetual brand mismanagement and abuse, in addition to defaults on royalty and supplier payments, Hard Rock International pursued a second ICC arbitration for the termination of the entire master franchise agreement and ancillary contracts. As a result of this arbitration, the tribunal found in favor of Hard Rock International effectively finding that the termination was valid given the master franchisee's numerous defaults.
"This case sets a landmark precedent for franchise operators in Mexico, and demonstrates that in Mexico legal certainty is available for investors and laws are enforced," said Luis Rubio, a partner with the law firm Greenberg Traurig in Mexico City who represented Hard Rock International. "It acknowledges that a defaulting party can be penalized with not only closure of specific venues, but also the termination of an entire franchise system and business model."
"After years of mismanagement and tarnishment of the Hard Rock Cafe brand in Mexico, we applaud the ICC's landmark ruling," said Michael Beacham, Vice President of Franchise Operations for Hard Rock International. "We look forward to reinvesting in the brand, growing it and bringing the high-standards of the Hard Rock Cafes back to Mexico."
Operadora DB Mexico, S.A. de C.V. and some of its subsidiaries continue to operate several Hard Rock Cafe restaurants in Mexico, namely, cafes in Cozumel, Cancun, Acapulco and Cabo San Lucas, in violation of the ICC's ruling. Hard Rock International has commenced legal action to ensure that the ICC's order is properly enforced.
About Greenberg Traurig
Greenberg Traurig, LLP is an international, multi-practice law firm with approximately 1750 attorneys serving clients from 36 offices in the United States, Latin America, Europe, the Middle East and Asia. Greenberg Traurig is among the Top 10 law firms on The National Law Journal's2013 NLJ 350, an annual ranking of the largest firms in the U.S. For additional information, please visit www.gtlaw.com.
About Hard Rock International
With a total of 174 venues in 55 countries, including 136 cafes, 19 hotels and 7 casinos, Hard Rock International (HRI) is one of the most globally recognized companies. Beginning with an Eric Clapton guitar, Hard Rock owns the world's greatest collection of music memorabilia, which is displayed at its locations around the globe. Hard Rock is also known for its collectible fashion and music-related merchandise, Hard Rock Live performance venues and an award-winning website. HRI owns the global trademark for all Hard Rock brands. The company owns, operates and franchises Cafes in iconic cities including London, New York, San Francisco, Sydney and Dubai. HRI also owns, licenses and/or manages hotel/casino properties worldwide. Destinations include the company's two most successful Hotel and Casino properties in Tampa and Hollywood, Fl., both owned and operated by HRI parent company The Seminole Tribe of Florida., as well as other exciting locations including Bali, Biloxi, Chicago, Cancun, Las Vegas, Palm Springs, San Diego and Singapore. Upcoming new Hard Rock Cafe locations include Chennai, Istanbul and Tenerife. New Hard Rock Hotel projects include Daytona Beach, Aruba, Abu Dhabi and Shenzhen and Haikou in China. New Hard Rock Casino projects in development include Hungary and Northfield, OH. For more information on Hard Rock International, visit www.hardrock.com.
SOURCE Hard Rock International