Problem
Yumilicious, a company that franchises frozen yogurt restaurants in Texas, entered a franchising agree-ment with Why Not, LLC. The agreement was also personally guaranteed by the principals of Why Not, Matthew Barrie, and Kelly and Brian Glynn. The agreement franchises two Yumilicious frozen yogurt stores in South Carolina.
Why Not faced difficulties turning a profit, partly because a supply agreement negotiated by Yumilicious fell through which meant Why Not could not economically purchase supplies in South Carolina. As a result of its difficulties, Why Not closed one of its stores without permission from Yumilicious and failed to make payment for royalties and products. Yumilicious subsequently sued.Why Not countersued Yumilicious, alleging that it had violated the Texas Deceptive Trade Practices Act, specifically the provision that made it illegal for a franchisor to "represent[] that goods or services have . . . characteristics [or] benefits . . . which they do not have" or to "fail[] to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transac-tion into which the consumer would not have entered had the information been disclosed."As proof of the violations, Why Not alleged that Yumilicious had failed to provide an updated Franchise Disclosure Document. Furthermore, the Franchise Disclosure Document that was provided underestimated start up costs and failed to mention the out-of-state supply agreement that would supply Why Not could fall through.
Which category of franchise does the franchise in this case fall under? How did the court rule on Why Not's counterclaims and what was its reasoning?