Background
Supermac’s, an Irish fast-food franchise with over 100 outlets established in 1978, operated two franchise restaurants in Limerick through Watchford Limited—a company controlled by John and Mary Lyons. The Ennis Road premises, owned by Supermac’s and fitted out by the franchisor, operated from 1995 under a 10% monthly franchise fee (net of VAT). The Dooradoyle premises, which neither party owned, operated from 2003 at 6% of turnover. Critically, neither franchise was documented by a written agreement despite operating successfully for decades.
In 2014, Watchford’s solicitor asserted that the 10% Ennis Road fee comprised a 7% franchise fee and a separate 3% equipment fee designed to recover Supermac’s €500,000 initial fit-out investment. Watchford claimed it had overpaid approximately €1.1 million in cumulative equipment fees and demanded the 3% charge be waived if Supermac’s undertook further refurbishment. When Supermac’s refused and declined refurbishment work, Watchford unilaterally ceased paying the full 10% in August 2018, remitting only 7% of turnover, thereby withholding approximately €75,021 in disputed fees.
Supermac’s sued for €106,505 in unpaid franchise and ancillary fees from September 2018 to August 2019 (plus interest at 8% above ECB rate). Watchford counterclaimed for approximately €907,000 as an alleged overpayment of equipment fees, contending the 3% obligation terminated once cumulative payments equaled the value of fit-out and refurbishment work completed by Supermac’s.
The Court’s Holding
Justice David Keane resolved the central contractual dispute by analyzing invoice documentation, witness testimony, and accounting practices. Every invoice Supermac’s issued to Watchford from 1995 onward stated a single undifferentiated sum of 10% of monthly turnover—with no itemization suggesting a 7%/3% split. Maeve Noone, Supermac’s assistant accounts director with 30 years’ experience, testified she had never encountered a separate equipment fee arrangement among Supermac’s 100+ franchises and was unfamiliar with any such concept. The company’s forensic expert, John Healy, noted that if Watchford were truly repaying Supermac’s capital investment via a distinct equipment fee, he would expect Watchford’s audited financial statements to capitalize the equipment as an asset with a corresponding liability—yet no such accounting appeared in Watchford’s published accounts (though internal management accounts did separately identify 7% and 3% components, a practice Hogan acknowledged would not be appropriate accounting treatment).
The court rejected Watchford’s reliance on its internal management accounts as dispositive, treating Watchford’s unilateral accounting segregation as, at most, a single factor insufficient to override the consistent invoice documentation, Supermac’s standard practice across all owned-premises franchises charging 10%, and the complete absence of any contractual language terminating the 3% payment upon cost recovery. Justice Keane found particularly significant that no invoices for equipment were ever provided to Watchford and that Supermac’s never suggested the 10% fee would reduce to 7% once fit-out costs were recouped—a term that would effectively constitute an interest-free loan contrary to commercial norms.
Key Takeaways
- Undifferentiated invoices over 23 years form strong evidence of contract terms in oral franchise agreements; unilateral internal accounting by one party cannot override contemporaneous documentation.
- A franchisee cannot unilaterally cease payment of contractually due fees simply by reinterpreting historical practice, even where the underlying relationship was profitable to both parties.
- Absence of written franchise agreements, while problematic, does not prevent courts from determining terms through documentary evidence (invoices), witness credibility, and industry custom.
- Unjust enrichment claims fail when the alleged overcharge reflects a genuinely binding undifferentiated fee structure, regardless of the actual cost incurred by the franchisor.
Why It Matters
This judgment establishes critical principles for Irish franchise law, particularly concerning oral agreements and invoice-based proof of contractual terms. Supermac’s precedent reinforces that consistent invoicing over decades, combined with witness testimony regarding standard industry practice, can conclusively establish the true terms of an unwritten franchise contract. The decision protects franchisors from having fee structures retroactively reinterpreted by franchisees based on unilateral accounting treatments, even when a franchisee’s accountant testifies to internal management practices treating fees as severable.
The ruling also illustrates the commercial risk of operating major franchise relationships—such as Supermac’s and Watchford, with over €47 million in aggregate turnover—without written agreements. Had either party memorialized the fee structure in 1995, the 23-year dispute could have been avoided. For franchisees, the judgment underscores that accounting practices internal to one party’s books will not override invoice documentation or establish contractual terms the franchisor never agreed to. For franchisors operating in Ireland, the decision confirms that consistent, contemporaneous billing practices constitute powerful evidence of contract interpretation absent written documentation.