Spotlight on McDonald’s—Franchise Termination.

C.B. Management, Inc., had a franchise agreement with McDonald’s Corp to operate McDonald’s restaurants in Cleveland, Ohio. The agreement required C.B. to make monthly payments of certain percentages of the gross sales to McDonald’s. If any payment was more than thirty days late, McDonald’s had the right to terminate the franchise. The agreement also stated that even if McDonald’s accepted a late payment, that would not “constitute a waiver of any subsequent breach.” McDonald’s sometimes accepted C.B.’s late payments, but when C.B. defaulted on the payments in July 2010, McDonald’s gave notice of thirty days to comply or surrender possession of the restaurants. C.B. missed the deadline.

McDonald’s demanded that C.B. vacate the restaurants, but C.B. refused. McDonald’s alleged that C.B. had violated the franchise agreement. C.B. claimed that McDonald’s had breached the implied covenant of good faith and fair dealing.

Which party should prevail and why? [McDonald’s Corp. v.

C.B. Management Co., 13 F.Supp.2d 705 (N.D.Ill. 1998)] (See pages 695–696.)