Following termination of my All States M.E.D. franchise, what is the geographic restriction on offering competitive business services?
All_States_M_E_D Franchise · 2024 FDDAnswer from 2024 FDD Document
| q. Non-Competition Covenants During the Term of the Franchise | FA: Section 7.3 | You, your owners, and your officers, directors, executives, managers, professional staff, and employees are prohibited from: attempting to divert any business or customer of the Franchised Business to a competitive business or causing injury or prejudice to the Marks or the System; owning or working for a competitive business. |
|---|---|---|
| r. Non-Competition Covenants After the Franchise is Terminated or Expires | FA: Section 17.2 | For 2 years after the termination or expiration of the Franchise Agreement, you may not offer competitive business services within 90 miles of any other franchised outlet, or of any other Franchisor owned business; or solicit or influence any of our customers or business associates to compete with us or terminate their relationship with us. Subject to applicable state law. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 32–39)
What This Means (2024 FDD)
According to All States M.E.D.'s 2024 Franchise Disclosure Document, after the termination or expiration of the Franchise Agreement, a franchisee is restricted from offering competitive business services within a specific geographic area. For a period of 2 years, the franchisee cannot offer competitive services within 90 miles of any other franchised All States M.E.D. outlet or any business owned by All States M.E.D. itself. This restriction also includes soliciting or influencing any of All States M.E.D.'s customers or business associates to compete with All States M.E.D. or end their relationship with the company.
This non-compete clause is a standard practice in franchising to protect the brand and its existing franchisees from unfair competition by former franchisees who have gained knowledge and experience operating within the All States M.E.D. system. The 90-mile radius and 2-year duration are designed to prevent a former franchisee from directly leveraging the All States M.E.D.'s established market presence and customer base in a nearby area.
However, the FDD also notes that these non-competition covenants are subject to applicable state law. This means that the enforceability and specific terms of the non-compete agreement can vary depending on the state in which the franchise operates. Some states have stricter regulations regarding non-compete agreements, which could limit the scope or duration of the restrictions.
Prospective franchisees should carefully review the non-compete provisions in the Franchise Agreement and consult with legal counsel to understand the specific implications and enforceability of these restrictions in their state. It is important to consider how these limitations might affect their future business opportunities should they decide to exit the All States M.E.D. system.