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6-07.VYLENE [impl. covenant to negotiate franchise renewal].doc

a half from Vylene's restaurant.   In Scheck v. Burger King Corp., 756 F.Supp. 543 (S.D.Fla.1991), the court held, on facts similar to those present in this case, that the franchisee, although not entitled to an exclusive territory, was still entitled to expect that the franchisor would "not act to destroy the right of the franchisee to enjoy the fruits of the contract."  Id. at 549.

We agree.   Vylene did not have any rights to exclusive territory under the terms of the franchise agreement, and we do not impliedly read any such rights into the contract.   However, Naugles' construction of a competing restaurant within a mile and a half of Vylene's restaurant was a breach of the covenant of good faith and fair dealing.   The bad faith character of the move becomes clear when one considers that building the competing restaurant had the potential to not only hurt Vylene, but also to reduce Naugles' royalties from Vylene's operations.

CONCLUSION

For the reasons stated above, we vacate the district court's order and remand.   Since the district court did not reach several other issues raised by the parties, the district court is instructed to consider any remaining relevant issues, and enter an appropriate order or orders following such hearings as it deems necessary.   Unless a different result is required by the district court's decision on the remaining issues, the district court shall reinstate the bankruptcy court's findings of fact, conclusions of law and judgment.

VACATED and REMANDED with instructions.

Seg. 6, item 7 (2007)

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