The Domino's Pizza Enterprises Ltd (ASX: DMP) share price will be on watch on Tuesday after a late announcement by the pizza chain operator on Monday.
What did Domino's announce?
According to the release, Domino's expects to be served with Federal Court proceedings by an Australian franchisee very shortly.
Whilst the company would not normally comment on these matters, especially at this stage, it made the move after becoming aware that the media had been briefed before the statement of claim has been served.
Why is it being served with Federal Court proceedings?
Domino's revealed that the litigation is in relation to a commercial dispute between it and the franchisee.
This follows its previous announcement relating to its efforts to improve the standards of its franchisee network. It previously warned that these efforts would likely lead to some franchisees being unhappy with Domino's and seeking to leave the network.
The two parties have been in discussions for some time, but have failed to come to a settlement.
It notes that it previously flagged that some of its franchisees might choose to take legal action or to raise the threat of litigation through the media in an attempt to achieve leverage to bargain with it.
While Domino's has not been served with the formal legal proceedings, it is aware of the general nature of the claims. It rejects them and intends to defend them in court if they are served.
It said: "While DPE is disappointed that the franchisee has chosen this path of litigation, from the information available to it, DPE considers the franchisee's claims to be without merit, and in fairness to our investors and franchisee network it is important that we defend the claims. The claims are not expected to be financially material to DPE."
