Rationales in favor of the use of noncompete agreements depend for the most part on the type of CNC at issue. For instance, in a business sale context, the buyer is purchasing the goodwill of the business which could arguably be ‘stolen back’ by the seller after the sale if the seller were permitted to compete with the new owner, the buyer, after the sale. And, in an employment context, the employer arguably would not have an optimal incentive to invest in training of his employees and developing costly trade secrets if his employees were able to quit and promptly begin to use this valuable information to compete with the former employer.
The justifications for CNCs in franchise agreements as set forth in relevant case law including those from other business contexts, as well as several others manufactured by franchisors that are unique to franchising. These include, for instance, the protection of the franchisor’s right and need to refranchise the former franchisee’s territory after the termination of the franchise relationship.
Unfair Noncompete Agreements
- Overview
- Legal Background of Noncompete Agreements
- Modern Legal Analysis of Noncompete Agreements
- Not All Noncompete Agreements Are Equal Under the Law
- The Distinction Between In-Term and Post-Term Noncompete Agreements
- Rationales for the Use of Noncompete Agreements
- Recent Empirical Analyses of Noncompete Agreements
- Selected Cases and Individual State Laws on Franchise Noncompete Agreements
- Recommendations for Future Analysis of Franchise Noncompete Agreements
- Action Steps for Clients and Potential Clients Regarding Noncompete Agreements
