The “Hole” Story
by Ron Davis
Is a bagel merely a type of doughnut? Or is a doughnut just a type of bagel?
The answers to those questions became the focal points of a recent lawsuit involving the owners of a Florida shopping center and one of their tenants.
The shopping center, Overseas Market, in Key West, had leased space to the tenant since 1996 for the operation of a bagel bakery. As part of the lease contract, the shopping center's owners agreed to an exclusivity provision stating that the tenant "shall be the exclusive tenant within the shopping center...whose main business is the sale or distribution or bagels, or whose business otherwise functions as a 'bagel bakery.'"
Several months ago, however, Dunkin' Donuts expressed an interest in operating a doughnut bakery at the shopping center. And the center's owners subsequently leased space to a Dunkin' Donuts franchisee.
The bagel bakery tenant soon learned that the Dunkin' Donuts franchise would offer bagels along with doughnuts. So he sued the shopping center owners on grounds that their lease agreement with Dunkin' Donuts violates the exclusivity provision of his lease.
A Florida circuit court judge agreed with the tenant, finding that Dunkin' Donuts intended to operate a business that functions as a bagel bakery in competition with the tenant.
On appeal, that ruling was reversed. A Florida appellate court decided that the operation of a Dunkin' Donuts franchise at Overseas Market would not violate the exclusivity clause of the tenant's lease.
Explained the judges, "The tenant argued that because Dunkin' Donuts sells bagels, Dunkin' Donuts is a 'bagel bakery.' We disagree that the mere fact that Dunkin' Donuts sells bagels makes it a 'bagel bakery.' Although not necessary for our decision in this case, we further note that the small amount of bagels Dunkin' Donuts bakes and sells, relative to the rest of its products, is incidental to its business and further indicates that it does not function as a 'bagel bakery.'" (LPI/Key West Assoc. v. Sarah Luna, Inc., 749 So.2d 564 [Fla.App. 3 Dist. 2000])
Decision: March 2000
Published: May 2000