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Mcdonald's System, Inc. v. Sandy's Inc.

DECEMBER 31, 1963.




Appeal from the Circuit Court of Peoria County; the Hon. JOHN T. CULBERTSON, Judge, presiding. Decree reversed and cause remanded with directions.


The contract upon which this action is based, recites that McDonald's Self-Service System, Inc. is a California corporation and the originator and creator of a self-service drive-in food establishment system, generally known and referred to as "McDonald's Speedee System"; that this system includes special design of building, equipment layout, food formulas for hamburgers, cheeseburgers, malts, soft drinks, and french fries, and a chart method of inventory, schedule of business practices, and policies. The contract further recites that this McDonald's Self-Service System is the sole and exclusive owner of all proprietary and other property rights and interests in and to, "the tradename or trademark, McDonald's Hamburgers," and the trademark, "I'm Speedee," and that said system is being adopted, used and widely advertised in the United States. It then states that McDonald's System, Inc. is an Illinois corporation, and had obtained from the California Corporation, by license agreement, the exclusive right to license others throughout the United States, in the adoption and use of said system and said tradename and said trademark.

This agreement is dated December 16, 1955, and in it the plaintiff herein, McDonald's System, Inc. of 221 North LaSalle Street, Chicago, Illinois, is referred to as First Party and McDonald's of Champaign-Urbana, Inc. an Illinois Corporation is referred to as Second Party. This agreement includes the following provisions:

"1. First Party hereby gives and grants to Second Party and Second Party hereby accepts for the period and upon and subject to the terms, conditions, and limitations hereinafter set forth and contained, the right, license and privilege to (a) Adopt and use the aforementioned system at the location specified in the premises hereof and in connection therewith to indicate to the public that Second Party is a licensee of "McDonald's Speedee System", and (b) Adopt and use the said tradename and/or trademark "McDonald's Hamburgers" and the said trademark "I'm Speedee" in connection with the said operation and the products sold and dispensed thereat, and (c) Send, at any time within six (6) months from and after date hereof, not more than two (2) persons to a McDonald's Speedee System drive-in food establishment (as shall be designated by First Party) for training for a period of one (1) week under the general supervision of First Party in the recommended procedures and practices of the said system, provided however, that any and all traveling, living and other expenses and/or compensation of the said trainee shall be fully paid and defrayed by Second Party and shall be at no cost or expense whatsoever to First Party.

"2. Second Party does hereby acknowledge that the grant of this franchise and license is the sole and only consideration for the payment of the sum of $950.00 paid by Second Party to First Party concurrently with the execution of this agreement, and that said sum shall have been fully earned by First Party upon the execution and delivery hereof.

"3. First Party does herewith, furnish and loan to Second Party, receipt of which is hereby acknowledged by Second Party, each of the following: (a) Set of blue print plans for the construction of the aforementioned special design building, the exterior appearance of which is more particularly set forth and delineated upon the drawing attached as Exhibit `A' hereto, and hereby made a part hereof; (b) Copy of the aforementioned equipment layout; (c) Copy of the aforementioned formula for hamburgers, cheeseburgers, malts, soft drinks, and french fries; (d) Copy of the aforementioned chart method of inventory; (e) Copy of the aforementioned list of business practices and policies; and (f) First Party, at its sole cost and expense shall furnish one experienced person to assist the Second Party in establishing the said system for a period of one (48-hour) week at any time during the first four weeks of actual operation of said establishment by Second Party hereunder.

"4. Second Party acknowledges that, subject only to the license hereinabove given and received, McDonald's Self-Service System, Inc., is the owner of all proprietary rights in and to the said system and each and every part thereof, and the said tradename and trademarks together with the good will now and hereafter thereto attached; that the material and information now and hereafter provided and/or revealed to Second Party under and pursuant to this agreement constitute trade secrets of McDonald's Self-Service System, Inc., revealed in confidence hereunder, and that no right is given or acquired to use or duplicate this system or any portion thereof elsewhere than at the location specified in the premises hereof. Second Party covenants and agrees to keep and respect the confidence hereunder reposed and Second Party covenants and agrees to return to First Party, upon the completion of the building and the installation of the equipment, the set of building plans and the equipment layout plan furnished and loaned by First Party to Second Party in accordance with Paragraph 3 above.

"5. Second Party understands and acknowledges that each and every detail of said system is most important and advantageous, not only to First Party and its aforenamed licensor, but also to its licensees, including Second Party as one thereof, and that full compliance and conformance therewith by all licensees is essential to best preserve, maintain and enhance the reputation, trade demand and good will built up for the said system, the establishments adopting and using the same, the products sold and dispensed therefrom, and the aforementioned tradename and trademarks used in conjunction therewith.

"6. The franchise and license granted to Second Party hereunder is granted by First Party, and accepted by Second Party, upon and subject to the following express terms and conditions:

(a) Unless otherwise consented to by First Party in writing, the drive-in establishment to be constructed by Second Party hereunder shall be completed within 180 days from date hereof and shall be, and shall remain through the effective term of franchise and license, a building constructed and equipped in accordance with the building blueprints and equipment layout plan furnished in accordance with Paragraph 3 hereof, and surrounded by a macadamized parking lot the dimensions of which shall be not less than 100 X 125 feet. Second Party shall install and use at the said establishment only such equipment and fixtures as shall conform to standards of quality and utility approved by First Party. The said parking area shall be maintained by Second Party at all times as a parking area for the exclusive use of Second Party and the customers of Second Party in the conduct of the enterprise herein contemplated, namely the operation of a specialized retail drive-in food establishment. Said establishment (building, equipment, and parking area) shall be kept and maintained at all times by Second Party in good condition and repair and in appearance clean and neat.

(b) All employees of Second Party, while engaged in the operation of said establishment, shall wear uniforms conforming in color and design to such specifications as First Party from time to time may designate for use of other franchise holders and licensees; and said employees shall at all times during said employment present a neat and clean appearance and render competent, sober and courteous service to the patrons of said establishment; and there shall be used in the dispensing and sale of products therefrom only such containers, cartons, sacks, napkins, spoons, flavorings and garnishments as shall comply with the specifications and standards prescribed by First Party from time to time; and there shall be used in the dispensing and sale of said products such, and only such, signs, cards, notices, displays or decorations as shall be supplied or approved by First Party.

(c) For and during the effective term of this franchise and license, Second Party is not to dispense, sell or offer to sell at the said establishment, under the aforementioned tradename and trademarks or otherwise, any item or product that does not conform to such standards and specifications of proportion, appearance, quality, coloring, flavoring, and/or other ingredients or characteristics as from time to time may be prescribed by First Party and furnished in writing to Second Party.

(d) Second Party, at his own cost and expense, shall cause to be constructed, erected and maintained at all times while operating under this franchise and license, signs upon the said building and neon sign in said parking area conforming to the appearance and construction provided for and delineated in the designs appended as Exhibit `A' hereto and the detailed plans and sketches of which are furnished to Second Party by First Party concurrently herewith. All advertising matter shall be submitted to and approved by First Party prior to publication.

(e) Second Party shall comply with all Federal, State, County and City laws, ordinances and regulations affecting directly or indirectly the operation of the said food establishment.

(f) The said food establishment shall be open for business to the public at least twelve (12) hours per day and not less than 300 days during each year of the term of this agreement.

(g) First Party shall have the right to inspect the said establishment and Second Party's operations hereunder at all reasonable times to determine the ...

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