Non-Competes
Understanding Non-Competes
Non-compete agreements often restrict former franchisees from operating in certain areas or industries. We help you understand the scope and validity of these clauses, determine whether they are enforceable, and negotiate reasonable terms. If a non-compete unfairly limits your ability to earn a living, our team at Bundy & Fichter can help you challenge it.
The Purpose of Non-Competes.
Many franchisors include covenants not to compete in their franchise agreements. Franchisors view such provisions as important to protect their claimed proprietary information and to protect their franchise system from competition by someone they helped to get started in the business. They also present franchisees with an obstacle to leaving the franchise and using their knowledge, equipment and facilities in the same line of business.
Enforceability of Non-Competes.
Although California limits the enforceability of non-compete covenants, most states will enforce them if signed as part of a business agreement. Franchisees should not assume that such covenants are not enforceable. Most states will enforce them most of the time. It is important to consult with an experienced franchise attorney before signing a franchise agreement that contains a covenant not to compete. You should understand the geographic scope of what you sign and the length of time your activities will be restricted. It may not seem important when you are excited about getting into the business, but it becomes very real when something goes wrong in the franchise relationship, and you learn that, although you must continue to pay for the premises lease and equipment for many years, you will not be able to operate a business similar to what you operated as a franchisee.
What Non-Competes for Your Employees?
Your franchise agreement may require you to have some or all of your employees sign non-compete agreements. Some states, including Washington and California limit the enforceability of such agreements. Washington goes so far as to make it unlawful to include such a requirement in a franchise agreement or to attempt to enforce it. Before you sign a franchise agreement, you should consult with an experienced franchise attorney about whether it complies with the laws of the state you will be doing business in regarding the treatment of employees. You are ultimately responsible for complying with state laws, but you should understand whether your franchise agreement may put you in conflict with such laws.
Discuss Your Concerns In A Free Consultation
If you are considering signing a franchise agreement and it contains a covenant not to compete, consult a knowledgeable franchise lawyer before you sign. contact us.