Wednesday, February 20, 2008

IHOP Is Not Fast Food

In the case of McDonald v Rappaport et al, Judge Tauro of the United States District Court of Massachusetts, found that the International House of Pancakes is not a fast food restaurant. Judge Tauro also highlights a few drafting points for restrictive covenants.

In a lease with McDonald's Corporation, the landlord agreed to a provision that prohibited the landlord allowing a "so-called fast food restaurant, food service establishment, drive-in or walk-up eating facility" on property owned, leased or controlled by the landlord within two miles.

The court found the provision ambiguous as to whether "so-called fast food" modified only "restaurant" or also modified "food service establishment," "drive-in" and "walk-up." The court found that "so-called fast food" applied to each term after a bench trial. In evidence was an earlier draft of the provision that did not include "fast food."

The court also went on to note that a restrictive covenant like this is a restraint on alienation. In Massachusetts, "restrictions on land are disfavored, and they in general are to be construed against the grantor and in favor of freedom of alienation.” [citing Stop & Shop Supermarket Co. v. Urstadt Biddle Props., 740 N.E.2d 1286, 1289 (Mass.App. Ct. 2000)] So the narrower reading of applying the "so-called fast food" modification applies to all of the cited uses.

Even though the McDonald's lease does not define “so-called fast food,” McDonald's and IHOP did not dispute that IHOP is not a fast food restaurant under any definition of “fast food” or “quick service.” McDonald’s and IHOP both agreed that IHOP is a full service, family style restaurant.

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