Claims Brought by Franchisor of Co-Working Concept Survive (Mostly): Key Takeaways from RGN-USF v. Megatron Workspaces
In RGN-USF, LLC v. Megatron Workspaces of Michigan, LLC, No. 2:25-cv-10967 (E.D. Mich. May 29, 2026), a federal court’s ruling on a motion to dismiss largely sided with the Regus brand franchisor in a dispute over terminated co-working space franchises in Southeast Michigan.
What happened. RGN-USF (the U.S. sublicensor of the Regus brand) entered a multi-unit development agreement and four separate franchise agreements with entities controlled by a individual named John Schmidt to open and operate Regus co-working offices in the Detroit area. When the franchisees allegedly failed to meet various obligations — including obtaining operating certificates, remitting fees, and engaging in competitive conduct — RGN sent default notices in October 2024 and terminated the agreements in November 2024. The defendants continued using the Regus brand. RGN then sued for breach of contract, trademark infringement, specific performance, and unjust enrichment.
Motion to Dismiss. The former franchisee defendants moved to dismiss on five grounds. The Court rejected four of them and granted only one:
- Mediation condition precedent: The Court found that the development agreement’s mediation requirement was a precondition to arbitration, to not filing suit in federal court. Because neither party was seeking arbitration, there was no obligation to mediate.
- Notice: The Court held the complaint gave each defendant fair notice of the claims against it, despite incorporating prior allegations into each count.
- Improper termination: This was the heart of the dispute — and where Michigan franchise law plays a central role. Under Mich. Comp. Laws § 445.1527(c), a franchisor cannot terminate a franchise before its term expires without “good cause.” The statute defines good cause to include a franchisee’s failure to comply with any lawful provision of the franchise agreement, provided the franchisor gives written notice and a “reasonable opportunity” to cure — which “in no event need be more than 30 days.” In other words, the statute sets a ceiling, not a floor: franchisors must give at least some reasonable cure period, but 30 days is always enough.
The Court found that each franchise agreement provided independent grounds for termination — some allowing immediate termination (such as competitive conduct or dishonest behavior), others requiring only 7 days’ cure period (payment defaults) or 60 days (failure to obtain an operating certificate). RGN provided at least 30 days to cure in every instance, which satisfied § 445.1527(c). The defendants’ argument that they deserved 60 days to cure failed because it conflated all four franchisees into one and ignored the multiple, severable termination grounds — each of which independently justified termination on a shorter timeline.
- Trademark infringement: Because the Court found that termination was adequately pled, the defendants’ defense that they were still franchisees collapsed.
- Unjust enrichment (dismissed): The Court dismissed this claim because both sides acknowledged the existence of the underlying contracts, which forecloses equitable relief under Michigan law.
Bottom line. This case reinforces that franchisors who carefully document multiple, independent grounds for termination and provide notice exceeding statutory minimums put themselves in a strong position to prosecute enforcement actions — even at the earliest stages of litigation.
