Does the Auntie Annes Franchise Agreement contain a covenant not to compete that extends beyond the termination of the franchise, and what should California franchisees be aware of regarding this?

According to Auntie Annes's 2024 Franchise Disclosure Document, the Franchise Agreement does contain a covenant not to compete that extends beyond the termination of the franchise. However, for prospective franchisees in California, this provision may not be enforceable under California law. This is due to California's specific legal environment regarding non-compete clauses, which generally disfavors such restrictions, especially after the franchise relationship ends.

This means that if a franchisee's agreement with Auntie Annes is terminated, the enforceability of the non-compete clause will be determined by California law, regardless of what the franchise agreement states. California law may find the non-compete agreement unenforceable, allowing the former franchisee to engage in similar business activities without legal repercussions. This provides a potential advantage for franchisees in California compared to those in other states where post-termination non-compete agreements are strictly enforced.

Prospective Auntie Annes franchisees in California should seek legal counsel to fully understand their rights and obligations regarding the non-compete clause. Consulting with an attorney can clarify the specific circumstances under which the clause might or might not be enforced, and help the franchisee make informed decisions about their business activities post-termination. This is particularly important given that the Franchise Agreement may contain provisions requiring application of the laws of Georgia, which may not be enforceable under California law.