For a Belocal franchise in California, what is the potential impact of the amendment on the agreement's covenant not to compete?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
:
- a. California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or non-renewal of a franchise. If the Agreement contains a provision that is inconsistent with the law, the law will control.
- b. The Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
- c.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the franchise agreement contains a covenant not to compete that extends beyond the termination of the franchise. However, this provision may not be enforceable under California law. This means that if a Belocal franchisee in California leaves the franchise, the restrictions on starting a competing business might not hold up in court.
Specifically, California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or non-renewal of a franchise. If any provision in the Belocal Franchise Agreement is inconsistent with California law, the law will take precedence. This is a significant protection for franchisees in California, as it ensures that state laws override any conflicting terms in the franchise agreement.
Prospective Belocal franchisees in California should consult with legal counsel to fully understand the implications of the covenant not to compete and how California law may affect its enforceability. This consultation can help clarify the extent to which they would be restricted from engaging in similar business activities after leaving the Belocal franchise.