Tuesday, November 09, 2010, 11/09/2010 12:52:00 PM

The Trade Secrets of Selling Used Children's Clothes - No Kidding

By Todd

The Detroit Free Press (a paper I used to have to hump for delivery in the snow) has a piece today on a new lawsuit brought by a franchisor against a former francisee that alleges, among other things, the former franchisee misappropriated trade secrets regarding the sale of used children's clothing. We've copied the piece below or you can read it by clicking on the title to this blog post:

It looks like the art of selling used kids clothing is a trade secret, too, at least according to a lawsuit filed in federal court in Detroit.

Ann Arbor based-Children's Orchard, a national chain that sells used children's clothing and accessories, filed a federal lawsuit last week against two franchise owners in Oklahoma City, alleging they violated a franchise agreement and a noncompete agreement, and stole trade secrets when they opened a competing store called Upsy Daisy.

One of the defendants, Tiffany Thomas, is baffled.

"There's no magic to selling kids clothes," Thomas said in a telephone interview. "Everybody in the world does it.... There's not a trade secret for running a resale clothing store."

The owners of Children's Orchard beg to differ.

In their lawsuit filed in U.S. District Court in Detroit, the company claims that Thomas and her now-ex-husband, Kent Jaecke, signed a franchise agreement in 2005 to run a Children's Orchard in Oklahoma City for 10 years. But on July 14, without permission, the couple closed the Children's Orchard store and moved to another location, the lawsuit claims.

There, records show, they "clandestinely began operating the store under the name Upsy Daisy, in violation of a noncompete agreement. And, they failed to return confidential operating manuals, customer lists, records, files, instructions and brochures that belonged to Children's Orchard, the suit claims.

"Defendants are using the Children's Orchard Business System and Trade Secrets and are directly competing with the Children's Orchard franchise system," the lawsuit states.

Upsy Daisy is owned by Thomas' father, Paul Overton Thomas, who was unavailable for comment. The lawsuit claims that Paul Thomas knew of the franchise agreement between his daughter and Children's Orchard and intentionally interfered with that relationship by setting up a competing business.

"I don't feel like I've done anything wrong," said Tiffany Thomas, who cited poor business sales as the reason for closing the Children's Orchard store. "I tried to sell it several times, but I couldn't get anyone to sign the franchise agreement."

Thomas said there are plenty of resale clothing stores in her city, all of which rely on a similar business formula: How much do you want for your clothing, and how much do you want to pay for used clothing?

"What would be the trade secret? Is that a trade secret?" Thomas asked.


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