Action Steps for Clients and Potential Clients Regarding Noncompete Agreements

If you are considering not renewing, terminating, or otherwise ending your relationship with your franchisor or manufacturer, you must consider the impact of this decision on your ability to operate and earn a living after the conclusion of that relationship. To a lesser extent, you should also be concerned about what business activities you are permitted to engage in while you are under contract with the franchisor or manufacturer.

To protect yourself, you must be able to answer the following questions before you terminate, fail to renew, or otherwise end your relationship:

• Does my franchise, distribution or dealership agreement have an in-term noncompete provision?
• Does my franchise, distribution or dealership agreement have a post-term noncompete provision?
• Does relevant state law permit a court to ‘blue pencil’ my noncompete clause?
• Does the duration clause of my CNC span too many years?
• Does the geographical scope clause of my CNC cover too much territory?
• Does the training I received from the franchisor, distributor or manufacturer comprise a trade secret?
• Am I permitted to keep my franchise business phone number, email address, website, and décor?
• Am I required to assign my lease to my franchisor or manufacturer after the relationship ends?
• Does my state have any statutes that prohibit the enforcement of CNCs?
• Does my CNC prohibit my wife and other family members from engaging in certain specified business activities?
• Do my future plans involve interacting with customers I previously serviced as a franchisee or dealer?
• Are my employees also subject to the CNC?
• Can the franchisor prohibit me under my CNC from operating an independent business in addition to my working for or with other competing franchisors or businesses?