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BP Business Economic Loss Claim Appeal 2016-1767: Out-of Zone Franchisor Does Not Meet Three-Part test of Exhibit 5 and Policy 467 on Basis of In-Zone Franchisee

The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms.

Claimant appeals the denial of its BEL claim submitted for a restaurant in Pensacola, Florida. The Claims Administrator determined that the claimant failed to demonstrate that the location was a “facility” as describedin Exhibit 5.
The record demonstrates that the claimant holds the exclusive right to own, operate and license others to own and operate restaurants in Florida. Claimant is based in Ft. Lauderdale and is thus outside of the Gulf Coast Recovery Zone. On June 1, 2010, Claimant entered into a franchise agreement with third parties which is in the record. The agreement grants a license to the third parties to operate a restaurant at the subject location in Pensacola. The agreement also provides for supervisory visits by Claimant’s representative as well as training an assistance by the claimant typically found in franchise agreements.
Exhibit 5 and Policy 467 provide that, in order to be considered a “Facility,” a location must meet a three-pronged test showing it to be (a) a separate and distinct physical structure, (b) owned, operated, or leased bythe Claimant, (c) at which the claimant performs or manages its operations. Policy 467 requires all three prongs
to be met and further provides that “a franchise location is not a Facility of the franchisor Entity if the franchisor does not own or lease the real property on which the franchise is located.”
The record contains no evidence that Claimant owns or leases the real property on which the restaurant in question is located. The record further shows that the location is operated by the franchisee, not the claimant. Claimant’s argument that it sends a representative to the location each month to provide “operational oversight”
and training for the management and staff is unpersuasive.
The District Court, as well as prior Appeal Panel decisions, have previously concluded that franchisors do not meet the requirements for compensation under the
Settlement Agreement. See District Court Opinion No. 16-1355, March 2, 2016.After careful consideration of the record, this panelist concludes that the record is insufficient to show that theclaimant qualifies as a “Facility.” The Claims Administrator’s decision was correct and the denial is upheld.

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