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BP Business Economic Loss Claim Appeal 2016-1697: Claimant’s Role as Franchisor Does Not Meet “Performing or managing” Requirement To Qualify As a “Facility”

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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, whose headquarters are located outside the Gulf Coast Recovery Zone as defined by the Settlement Agreement, appeals a thrice denied BEL claim for an
restaurant located in Key West, Fl., which restaurant is located in the Zone. Claimant assails the Program’s finding that the said restaurant is not Claimant’s separate
“facility” as that term is defined in Exhibit 5 of the Settlement Agreement and interpreted by Policy 467.
Many panel decisions have held that to qualify as a “facility,” the entity must meet all of the following three prongs: (1) a separate and distinct physical structure; (2) owned, operated, or leased by Claimant; (3) at which it performs or manages its operations. Assuming that it meets at least the first prong of this standard,
Claimant attaches to its appeal a letter from its representative stating that Claimant is the corporate successor, via a change of name, of and that it retained the lease over the subject property previously signed by As such, Claimant posits, it meets the “lease” component of the second prong of Policy 467, whether or not it is deemed to “operate” the property in question. As far as the third prong is concerned, Claimant refers to visitation reports allegedly reflecting its periodic inspection of the premises, as well as the License Agreement wherein it is obligated to be active in advertising and training for the subject restaurant. These factors, argues Claimant, meet the third prong’s standard of “performing or managing its operations” at the alleged franchise facility.
Even if we were to rely upon the lease in question to distinguish the present case from various prior panel decisions (and at least one Discretionary Review decision
issued by the District Court) disqualifying franchisors such as Claimant from qualification as “operators” of a franchise location, Claimant would nevertheless fail in its present appeal. Specifically, Claimant’s standard commitment as a franchisor, in the view of this panelist, falls far short of the third prong’s requirement that Claimant was “performing or managing its operations” at the subject restaurant. As such, the Program’s actions in disqualifying Claimant from the definition of a covered “facility” was proper and this appeal must be denied.

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