Following termination of the Belocal agreement, what is the geographic scope of the restriction preventing the franchisee from operating a Competitive Business?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
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- D. Post-term Noncompetition. For a period of two years after the termination, expiration, or transfer of this Agreement, regardless of the reason for such termination, expiration, or transfer, Franchisee and its Owner(s) shall not, within the Restricted Territory (as defined in Section 7.G. below):
- (1) own, operate, or manage any Competitive Business, or
- (2) engage in, provide, or assist others in engaging in or providing any Competitive Services; or
- (3) perform any activities for or relating to a Competitive Business, the performance of which would reasonably be likely to involve the use or disclosure of Confidential Information, and which activity is similar to the activities Franchisee or the Owner(s) engaged in during the twelve-month period prior to the termination, expiration, or transfer of this Agreement.
- E. Post-term Non-solicitation. For a period of two years after the termination, expiration, or transfer of this Agreement, regardless of the reason for such termination, expiration, or transfer, Franchisee and its Principal(s) shall not, solicit or attempt to solicit, using any form of oral, written, or electronic communications, any current or prospective business advertiser of Franchisor (or any of its affiliates) with whom Franchisee or any Principal interacted during the twelve-month period prior to the termination, expiration, or transfer of this Agreement, for the purpose of soliciting, offering, or accepting goods or services that are competitive with those offered by Franchisee, Franchisor, or any of Franchisor's affiliates.
- F. Exception. Nothing herein shall prohibit Franchisee or any Principal from owning, solely as an investment, securities of any Person traded on any national securities exchange if neither Franchisee nor any Principal controls, or is a member of a group which controls, such Person and does not, directly or indirectly, own 5% or more of any class of securities of such Person.
G. Definitions.
- (1) Restricted Territory.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, after the franchise agreement terminates, a franchisee is restricted from operating a competitive business within a defined "Restricted Territory" for a period of two years. The definition of this Restricted Territory is tiered, with the broadest definition applying initially, and narrower definitions taking effect only if a court or arbitrator deems the broader ones too restrictive.
The primary definition of the Restricted Territory includes the territories of, and a ten-mile radius around the perimeter of the territory of, any publication business owned by Belocal, its affiliates, or its franchisees, including the franchisee's own territory. If this is deemed too broad, the Restricted Territory then becomes simply the territories of any publication business owned by Belocal, its affiliates, or its franchisees, including the franchisee's own territory.
Should even this definition be considered too broad, the Restricted Territory is further reduced to just the territories of Belocal's franchisees, including the franchisee's own territory. As a final step, if the previous definition is still deemed too broad, the restriction applies only to a ten-mile radius around the perimeter of the franchisee's territory and the territory itself. Ultimately, if all other definitions are deemed too broad, the restriction is limited to just the franchisee's territory. This tiered approach provides Belocal with maximum protection while attempting to ensure the enforceability of the non-compete clause.