both parties to benefit from the arrangement.
On August 16, 1963, Family Dining opened the First Restaurant at 588 West DeKalb Pike in King of Prussia, Pennsylvania. The second Restaurant was opened on July 2, 1965, at 409 West Ridge Pike, Conshohocken, Pennsylvania, and the third Restaurant was opened October 19, 1966, at 2561 West Main Street, Norristown, Pennsylvania.
However, by April, 1968, Family Dining had not opened or begun active construction on a fourth Restaurant which, in accordance with the development rate, should have been accomplished by May 10, 1967, and it was apparent that a fifth Restaurant would not be opened by May 10, 1968, the date scheduled. On May 1, 1968, the parties entered into a Modification of the Territorial Agreement (hereinafter "Modification") whereby Burger King agreed to waive Family Dining's failure to comply with the development rate. (Plaintiff's Exhibit P-4). There is nothing contained in the record which indicates that Burger King received anything of value in exchange for entering this agreement. However, McLamore testified that if the fourth and fifth Restaurants would be built nearly in compliance with the development rate for the fifth year he would overlook the year or so default in the fourth Restaurant. (N.T. 39). This attitude seems to be consistent with his overall view toward the development rate with respect to which, he testified, was "designed to insure the company of an orderly process of growth which would also enable the company to produce a profit on the sale of its franchises and through the collection of royalties that the restaurants would themselves produce." (N.T. 35).
The fourth Restaurant was opened on July 1, 1968, at 1721 North DeKalb Pike, Norristown, Pennsylvania, and the fifth Restaurant was opened on October 17, 1968, at 1035 Bustleton Pike in Feasterville, Pennsylvania.
On April 18, 1969, Ferris forwarded a letter to McLamore pertaining to certain delays in site approval and relating McLamore's earlier statement that there would be no problem in waiving the development schedule for the sixth Restaurant. (Plaintiff's Exhibit P-5). The letter expressed Ferris' concern regarding compliance with the development rate. By letter dated April 26, 1969, from Howard Walker of Burger King, Ferris was granted a month extension in the development rate. (Plaintiff's Exhibit P-6). With respect to this extension McLamore testified that "it never crossed my mind to call a default of this agreement on a technicality." (N.T. 47).
On October 1, 1969, the sixth Restaurant was opened at 1515 East High Street in Pottstown, Pennsylvania. The seventh Restaurant was opened on February 2, 1970, ahead of schedule, at 560 North Main Street in Doylestown, Pennsylvania.
At this point in time Burger King was no longer a modest sized franchise system. It had became a wholly owned subsidiary of the Pillsbury Company and had, in fact, evolved into a complex corporate entity. McLamore was elevated to Chairman of the Board of Burger King and, while he remained the chief executive officer for a time, Arthur A. Rosewall was installed as Burger King's President. Ferris was no longer able to expect the close, one to one relationship with McLamore that had previously obtained in his dealings with the company. It seems clear that as a result Family Dining began to experience difficulties in its day to day operations with Burger King.
One of the problem areas which arose concerned site selection. In a typical situation when a franchisee would seek approval for a building site an application would be submitted to the National Development Committee comprised of various Burger King officials. Based on Ferris' prior showing regarding site selection it could be expected that he would have little difficulty in obtaining their approval. In McLamore's view, Ferris was an exceptionally fine franchisee whose ability to choose real estate locations was exceptional. (N.T. 61). However, in August, 1970, a Frankford Avenue location selected by Ferris was rejected by the National Development Committee. The reasons offered in support of the decision to reject are not entirely clear and it seems that for the most part it was an exercise of discretion. The only plausible reason, given Ferris' expertise, was that the site was 2.7 miles from another Burger King franchise operated by Pete Miller outside Family Dining's exclusive territory. Yet Burger King chose not to exercise its discretion in similar circumstances when it permitted another franchisee to build a Restaurant in Devon, Pennsylvania, approximately 3 miles away from an existing Family Dining Restaurant.
In his August 25, 1970, memo to the Carl Ferris file McLamore observed that Burger King "had sloppy real estate work involved in servicing him and that [Burger King was] guilty of many follow up delinquencies." (Defendant's Exhibit D-7). This was during a time, as Burger King management was well aware, where it was one thing to select a location and quite another to actually develop it. That is, local governing bodies were taking a much stricter view toward allowing this type of development. It was also during this time, as McLamore's memo points out, Burger King realized that the Bucks-Montgomery territory was capable of sustaining substantially more Restaurants than originally thought.
Amidst these circumstances, the eighth Restaurant was opened ahead of schedule on October 7, 1970, at 601 South Broad Street in Lansdale, Pennsylvania. And in December, 1971, Burger King approved Family Dining's proposed sites for two additional Restaurants in Ambler, Pennsylvania and Levittown, Pennsylvania.
In early 1972, Arthur Rosewell became the chief executive officer of Burger King. At this time it also became apparent that the ninth Restaurant would not be opened or under construction by May 10, 1972. On April 27, 1972, in a telephone conversation with McLamore, Ferris once again expressed his concern to Burger King regarding compliance with the development rate. Burger King's position at that time is evidenced by McLamore's Memo to the Carl Ferris file dated April 28, 1972, wherein he provides that "Ferris' territorial arrangement with the company is such that he must have his ninth store (he has eight open now) under construction next month. I indicated to him that, due to the fact that he was in the process of developing four sites at this time, the company would consider he had met, substantially, the requirements of exclusivity." (Plaintiff's Exhibit P-7). McLamore testified that at that time he had in mind a further delay of 3 to 6 months. (N.T. 55).
In April, 1973, Burger King approved Family Dining's proposed site for a Restaurant in Warminster, Pennsylvania. However, as of May 10, 1973, neither the ninth or the tenth Restaurant had been opened or under active construction.
A letter dated May 23, 1973, from Helen D. Donaldson, Franchise Documents Administrator for Burger King, was sent to Ferris. (Plaintiff's Exhibit P-10). The letter provides as follows:
Dear Mr. Ferris:
During a periodic review of all territorial agreements we note that as of this date your development schedule requiring ten restaurants to be open or under construction by May 10, 1973, has not been met. Our records reflect eight stores open in Bucks and/or Montgomery County, and one site approved but not manned.