Item 14 Reality Check: Toastique’s “Proprietary” Information on Trial
When you flip to Item 14 of a Franchise Disclosure Document (FDD), you might expect to see a lineup of patents, copyrights, or legally registered protections that make the brand truly unique. For some brands, that’s the case. For others, like Toastique, the section is light on intellectual property and heavy on contractual control. A lawsuit involving Toastique and its Austin franchisees shows why prospective franchisees need to read Item 14 closely, because this is where “proprietary information” becomes both a sales pitch and a legal weapon.
What Item 14 Requires
Item 14 of the FDD discloses a franchisor’s patents, copyrights, and proprietary information. It should tell you whether the system is backed by intellectual property protection, or whether it relies on trade secrets and confidentiality clauses instead.
Toastique’s 2024 FDD lists no patents or copyrights. Instead, it emphasizes that franchisees must treat the operations manual, business management systems, recipes, and “System Supplies” as proprietary and confidential. The franchise agreement makes clear that these materials belong exclusively to the franchisor, and that franchisees cannot use them outside the system .
In other words, Toastique’s protection doesn’t come from registered intellectual property. It comes from the contract you sign.
The Austin Lawsuit: Proprietary Claims in Action
In 2023, Toastique signed a franchise agreement with C & G Restaurant Holdings in Austin, Texas. Less than two years later, the relationship collapsed into litigation.
Toastique’s position: The franchisor sued, claiming the Austin operators breached their contract by converting the location into an independent restaurant. Toastique emphasized that its operations manual, recipes, systems, and supply chain are proprietary trade secrets that must be protected .
The franchisees’ position: In counterclaims, the franchisees alleged fraud and misrepresentation. They argue the Toastique model “doesn’t work” financially and that what the franchisor calls proprietary is really generic restaurant practices packaged as unique know-how .
At its core, the fight is over whether Toastique truly offered something distinctive, or whether it enforced ordinary practices as “proprietary” to justify restrictions, non-competes, and termination.
Why This Matters for Item 14
The lawsuit puts Item 14 under the microscope:
No real IP protection: Without patents or copyrights, Toastique leans on trade-secret claims and strict contract language. That means franchisees can be sued for “misusing” information even if the underlying concepts aren’t legally unique.
Overbroad application: Franchisees are required to treat even basic supplies and recipes as proprietary, limiting flexibility and potentially inflating costs through approved-vendor mandates.
Legal weaponization: As the Austin case shows, franchisors often invoke Item 14 obligations to terminate agreements and enforce non-competes. Whether or not the system is profitable becomes secondary, the proprietary framework controls the outcome.
Reality Check for Prospective Franchisees
If you’re considering a Toastique franchise, or any brand with a similar Item 14, ask these questions:
What’s actually protected? Are there patents or copyrights? Or is it just manuals and recipes anyone could replicate?
How enforceable is “proprietary”? Remember: if it’s not legally registered, enforcement comes through the franchise contract—and that means you could be sued for simply continuing to operate after leaving the system.
Does the business model stand on its own? If franchisees are alleging fraud and financial failure in court, “proprietary” procedures may not be the shield you think they are.
Final Word
Item 14 is often overlooked in due diligence. But as Toastique’s litigation shows, it’s the backbone of how franchisors define their system and protect their control.
The Reality Check: Proprietary claims can be both less than they appear (no patents, no copyrights) and more powerful than you expect (binding restrictions, grounds for termination, and lawsuits). Before signing on, ask whether you’re paying for true intellectual property or for ordinary processes wrapped in a legal net.
Franchise Reality Check™ provides educational content to help prospective and current franchisees understand their Franchise Disclosure Documents and related agreements. This post is not legal advice and should not be relied upon as such. Every franchise system is different, and trademark rights, registrations, and licensing arrangements can change over time. Always have your FDD and franchise agreement reviewed by a qualified franchise attorney before signing or making any investment decisions. The opinions expressed here are based on the information available as of the publication date and may not reflect subsequent updates or developments.
