Does Belocal have the right to modify the covenants for those who sign the Principals' Undertaking?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
We have the right, in our sole discretion, to decrease the period of time or geographic scope of the covenants or eliminate the covenants altogether for any person who signs the Principals' Undertaking and the Confidentiality Agreement and Ancillary Covenants Not to Compete or Ancillary Covenants Not to Solicit agreements.
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.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 47–48)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, Belocal has the right to modify the covenants for those who sign the Principals' Undertaking. Belocal can reduce the scope or eliminate the covenants altogether for any person who signs the Principals' Undertaking, the Confidentiality Agreement, and the Ancillary Covenants Not to Compete or Not to Solicit agreements. Belocal will provide immediate notice to the franchisee or principals, and the franchisee and principals must promptly comply with the modified covenant. The time periods in Section 7 will be tolled for any period of noncompliance.
This means that Belocal retains considerable flexibility in adjusting the restrictions placed on principals, potentially easing the burden of non-compete or non-solicitation agreements. This discretion could be beneficial in certain circumstances, such as when a principal's role changes or when market conditions warrant a less restrictive covenant. However, it also introduces an element of uncertainty, as the scope of these covenants could change during the franchise term.
Prospective franchisees should carefully consider the implications of these modification rights and discuss with Belocal the circumstances under which such modifications might occur. Understanding Belocal's typical practices in this area can help a franchisee assess the potential impact on their business and the obligations of their principals. Franchisees should also be aware that any failure to comply with the modified covenants will be considered a breach of the agreement.