Franchise Non-Compete Clause
Also known as: Restrictive Covenant, Non-Competition Agreement
A franchise non-compete clause restricts a franchisee from operating a competing business during the franchise relationship and for a specified period after termination or expiration. In-franchise non-competes (during the agreement term) prevent franchisees from operating similar businesses simultaneously. Post-termination non-competes restrict former franchisees from competing for typically 1-3 years within a defined geographic area. The enforceability of post-termination non-competes varies significantly by state, with some states (notably California) largely prohibiting them. The FTC's 2024 rule banning most non-compete agreements exempted franchise relationships, maintaining the status quo for franchising.
Real-World Example
A former Supercuts franchisee whose agreement has expired may be prohibited from opening or working at any hair salon within 5 miles of their former location for 2 years. In California, this restriction would likely be unenforceable. In Texas or Florida, courts generally uphold reasonable non-competes in franchise contexts.
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