Competing Restaurant Wasn't 'Similar in Concept'

Facts: A restaurant with a 1950s American roadside diner theme leased space at a shopping center. Later, the owner signed a lease with a pancake house restaurant franchisee for space nearby. The tenant asserted that the new lease with the pancake restaurant violated a restrictive covenant in its lease with the tenant. That restrictive covenant stated that “landlord shall not permit any other portions of the Shopping Center to be leased or sold for usage as a diner similar in concept to the operation conducted from the Leased Premises by Tenant.” The tenant asked a court for a temporary restraining order and preliminary injunction that would prevent the pancake restaurant from opening.

The owner claimed that the pancake restaurant wasn’t a diner similar in concept to the tenant’s restaurant, and therefore, the owner’s actions didn’t breach the restrictive covenant.

Decision: A Colorado trial court denied the request for a temporary restraining order and preliminary injunction.

Reasoning: The tenant stated that it negotiated the restrictive covenant to exclude other family-style diner concept restaurants with similar menus to its own, such as a pancake house-type restaurant. The court noted that the relevant language of the restrictive covenant is “diner similar in concept to the operation conducted from the Leased Premises by Tenant.” The “concept” at issue in the restrictive covenant is specifically the concept of a 1950s-style diner, not the general concept of a table service restaurant with a broad array of American breakfast, lunch, and dinner offerings, such that a pancake-house-style restaurant would serve. Moreover, the “concept” of the pancake restaurant is an all-day-breakfast diner. Because the tenant hadn’t made a strong showing of likelihood of success in proving that the forthcoming pancake restaurant was similar in concept to its own restaurant, the trial court determined that a temporary restraining order and preliminary injunction weren’t warranted at that time.

• Northglenn Gunther Toody’s, LLC v. Hq8-10410-10450 Melody Lane, LLC, November 2014