A business franchisor entered into a master lease as the tenant of a commercial property. The franchisor/tenant then sold the rights to operate a franchised business on the property and sublet the property to a franchisee/subtenant who operated the business on the property. A local agency announced its intent to take the commercial property in an eminent domain proceeding. Upon learning of the plans to take the property, the franchisor/tenant obtained from the franchisee/subtenant an assignment of the rights to recover goodwill compensation on the taking. The franchisor/tenant made a demand on the local agency for the amount of the goodwill compensation for loss of the occupancy of the premises, claiming he had the right to collect goodwill compensation under the assignment from the franchisee/subtenant. The local agency rejected the demand, claiming no goodwill compensation was owed to the franchisor/tenant since he was not the owner-operator of the business displaced by the taking. A California court of appeals held a franchisor/tenant who obtains by assignment the franchisee/subtenant’s rights to goodwill compensation due the owner-operator of a business located on a parcel of commercial property subjected to a taking may not recover goodwill compensation on the taking since the franchisor/tenant was not the owner-operator of the displaced business. [Galardi Group Franchise & Leasing, LLC v. City of El Cajon (2011) 196 CA4th 280]
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