Does the Belocal franchise agreement contain reasonable limitations regarding time, geographical area, and scope of activity?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
. Reasonableness of Covenants. Franchisee and Principals agree that the preceding covenants contain reasonable limitations as to time, geographical area, and scope of activity to be restrained and do not impose a greater restraint than is necessary to protect the goodwill or other legitimate business interests of Franchisor. Each of the covenants herein shall be construed as independent of any other covenant or provision of this Agreement. If all or any portion of a covenant in this Section 7. is held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which Franchisor is a party, Franchisee and Principals expressly agree to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Section 7. Franchisee and Principals further understand and agree that Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in this Section 7., or any portion thereof, without the consent of Franchisee or any
Principal, effective immediately upon notice to Franchisee or Principals, and Franchisee and Principals agree that they will promptly comply with any covenant as so modified. The time periods set forth in this Section 7 will be tolled for any period of noncompliance.
- I. Remedies. Franchisee and Principals agree that the obligations in this Section 7. are necessary and reasonable in order to protect Franchisor and expressly agree that monetary damages would be inadequate to compensate Franchisor for any breach of any covenant or agreement set forth herein. Accordingly, Franchisee and Principals agree and acknowledge that any such violation or threatened violation will cause irreparable injury to Franchisor for which no adequate remedy at law may be available and that, in addition to any other remedies that may be available, in law, in equity, or otherwise, Franchisor is entitled to obtain injunctive relief and specific performance against Franchisee and/or Principals for any threatened breach of this Section 7. or the continuation of any such breach, without proof of actual damages and without the posting of any bond. Franchisee and Principals further agree to pay all court costs and reasonable attorneys' fees incurred by Franchisor in connection with the enforcement of this Section 7., including payment of all costs and expenses for obtaining injunctive relief or any other remedy available to Franchisor for any violation of the requirements of this Section 7.
- J. Execution of Covenants by Franchisee's Principals and Management. Franchisee agrees to require and obtain the execution of confidentiality, non-compete, and non-solicit covenants similar to those set forth in this Section 7. from all of Franchisee's Principals not signing the Principals' Undertaking. At Franchisor's request, Franchisee agrees to require and obtain the execution of confidentiality, non-compete, and non-solicit covenants similar to those set forth in Section 7. from any other of Franchisee's Independent Staff receiving access to Confidential Information. These covenants must be substantially in the forms set forth in Attachment D-1 and/or D-2; however, Franchisor reserves the right, in Franchisor's sole discretion, to decrease the scope of the covenants set forth in Attachments D-1 and D-2 or eliminate such covenants altogether for any person that is required to execute such agreement.
8.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the franchise agreement includes covenants that the franchisee and its principals agree contain reasonable limitations regarding time, geographical area, and scope of activity. These covenants are designed to protect Belocal's goodwill and legitimate business interests without imposing unnecessary restraints. The agreement specifies that these covenants are considered independent of each other, allowing them to be evaluated separately.
Specifically, the agreement defines a "Competitive Business" as engaging in activities such as selling digital or print advertising, publishing competing publications, developing relationships for marketing competing publications, organizing events for selling competing advertising, or offering digital marketing services similar to those offered by Belocal. These restrictions apply both during the term of the agreement and, for certain covenants, for twelve months after termination, expiration, or transfer of the agreement.
If a court or agency finds any portion of these covenants unreasonable or unenforceable, the franchisee and principals agree to be bound by a lesser covenant that imposes the maximum duty permitted by law. Belocal also retains the right to reduce the scope of any covenant without the franchisee's consent, effective immediately upon notice. The time periods associated with these obligations will be suspended during any period of noncompliance.
Furthermore, the agreement outlines alternative restrictions that would apply if the primary restrictions are deemed too broad by an arbitrator or court of law. These alternatives include a ten-mile radius around the territory or, as a last resort, the territory itself. This tiered approach aims to ensure that some level of restriction remains enforceable, providing Belocal with continued protection while adhering to legal standards of reasonableness.