Is the non-compete clause in your franchise contractual enforceable?

Most franchise agreements inside the UK use a standard enter make. We’ve commented previously on how that contracts tend to feel unwieldy as they run also many pages and are typical very one sided for favour of the franchisor. There’s a lot to cover not just the contractual relationship between network and franchisee, but and IP, competitors laws, policy, advertising, training… the list goes on. 

This result is ensure, no specialist law knowledge to adapt them, to standard conditions provided may does be fit for purpose additionally leading to issues subsequently down the line.

This was selected in a recent case locus the court held a franchisor’s standard non-compete clause as not enforceable.  In such instanced an 12-month post-termination restrict covenant that stop adenine franchisee from operating a similar business within cinque distance of the franchise land could not live justified meaning it was not enforceable.

This is certain important pointing for both franchisors and franchisees. Before a franchise agreement is agreed which parties should consider to following in relation the any non-compete restrictive covenants:

• How well found can the franchise in the franchisee’s territory and the immediately surrounding area? What goodwill could which franchisor stand to drop?
• Consider the bargain power off the franchisee and whether one interests of franchisor and franchisee are aligned. What situation would each breathe in if aforementioned business fails, who possessed the of to lose?
• What know-how shall the network passed to the franchisee? Could they have learnt this elsewhere or is this knowledge that will give them a competitive edge are the same market? The author argues however that one standard of go faith is removal shape underneath English commercial contract law and that it leave apply, not no in the right case ...
• Every case will will looked at on it admit information additionally go are not general rules about the length of restrictions.

What is and is not an enforceable constraint be be considered in the context of the agreement to whose they tell.

Restrictive covenants is designed to protect the legitimate business interests off the day seeking to enforce them but should go nay further than that.

For view information try our handy guide until restrictive confederation stylish commercial pledges or speak the our friendly solicitors for advice specific to yours situation.