Is the covenant not to compete in the Alloy franchise agreement, which extends beyond termination, enforceable under California law?

According to Alloy's 2025 Franchise Disclosure Document, the enforceability of the non-compete covenant that extends beyond the termination of the franchise agreement is questionable under California law. Specifically, Item 17 of the FDD and the California Addendum to the Franchise Disclosure Document both state that such provisions may not be enforceable. This is due to California's general policy against restraints of trade, although there can be some exceptions.

For a prospective Alloy franchisee in California, this means that while the franchise agreement includes a non-compete clause that restricts their ability to engage in similar business activities after the franchise terminates, this clause might not be legally upheld in California. The FDD highlights that if any part of the franchise agreement is inconsistent with California law, the law will take precedence. This provides some protection to the franchisee.

It is important for potential Alloy franchisees to seek legal counsel to fully understand the implications of the non-compete clause and its enforceability in California. They should also be aware of the specific terms of the non-compete, including the duration and geographic scope of the restriction, as outlined in Section 10.D of the Franchise Agreement. This section states that for two years after the termination of the agreement, the franchisee cannot engage in a competing business at the former facility's premises, within 15 miles of the facility, or within 15 miles of any other Alloy business. Understanding these details is crucial for making an informed decision about investing in an Alloy franchise in California.