Two New Zealand Wendy's Supa Sundaes that tried to break away and run under new independent branding have been ordered to cease trading by a High Court judge.
Owners of Wendy's Supa Sundaes ice cream stores rebranded to Shake Shed & Co in an attempt to break away from Singapore-based parent company Global Food Retail Group, which purchased the master franchisor for A$10 million ($11.2m) in 2014.
READ MORE: • Wendy's Supa Sundaes takes NZ franchisees to court
Thirty-two of 34 Wendy's Super Sundaes stores abandoned their Wendy's franchise agreements and began trading as Shake Shed & Co.
Supatreats Asia, owned by Global Food Retail Group, took legal action against the a number of franchisees for breach of their agreements, seeking an interim injunction for them to cease trading.
Former Wendy's master franchisee Chang Xi told the Herald franchisees did not want to rebrand but were forced to due to restrictive measures from the franchisor, which had harmed business.
Xi said franchisees had been forced to comply with a set supplier list and purchase Australian ice cream 50 per cent more expensive than local product.
Only a handful of franchisees were party to the legal action and Chang said a full hearing is yet to take place.
But in his decision earlier this month, Justice Edwin Wylie said two of the former franchisees - one in Hastings and another in Mt Manganui - had rebranded "with their eyes open".
They rebranded in the face of warnings from Supatreats, he said.
"The situation they have placed themselves in now appears to be of their own making," he said.
"I am satisfied that the overall justice of the case favours Supatreats."
Wylie said Xi and franchisees had ignored written notices from Supatreats.
"Evidence to date suggests that Mr Chang was throughout working in the background to engineer the situation that has arisen, and then to present the revolt by franchisees as a fait accompli."
The Hastings and Mt Manganui franchisees have been ordered to remove all Shake Shed & Co signage and branding from their stores immediately.
They now have the choice to go back to trading as Wendy's, or cease business, pending further court orders.
"Supatreats has not purported to terminate their franchise agreements and is prepared to take them back into the Wendy's Supa Sundae fold."
Wylie said there was a risk significant damage had been caused to Supatreats' franchise business model and its ability to re-establish a presence in the New Zealand marketplace.
Wendy's and Shake Shed & Co stores operate as kiosks in shopping malls.
* an earlier version of this story incorrectly said that 32 franchisees were the subject of court action.