Must a Bft franchisee comply with non-competition and non-interference covenants after termination or non-renewal?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
A. Noncompetition Restrictions. Developer acknowledges that, under each Franchise Agreement executed pursuant to this Agreement, the Restricted Parties (as defined in the Franchise Agreements) are subject to certain restrictions and covenants regarding activities which are deemed competitive with those of Franchisor, including restrictions regarding Competing Businesses, as that term is defined in the Franchise Agreement (the "Noncompetition Restrictions"). Developer acknowledges and agrees that it and its owners are subject to, and will comply with, all of the Noncompetition Restrictions described in the Franchise Agreements, each of which is adopted herein as though copied in its entirety. Developer further agrees that, in addition to any obligations with respect to Noncompetition Restrictions under the Franchise Agreements, for two (2) years after the expiration or sooner termination of this Agreement, or if applicable, after Developer or an owner of Developer has assigned its interest in this Agreement or in Developer (as applicable), the Restricted Parties or the transferring owner (as applicable) shall not own, maintain, engage in, be employed as an officer, director, or principal of, lend money to, extend credit to, lease/sublease space to, provide services to, or have any interest in or involvement with, any other Competing Business: (a) within the Development Area; (b) within 10 miles outside the boundaries of the Development Area, or (c) within a 10-mile radius of any Studio that is open, under lease or otherwise under development as of the date this Agreement expires or is terminated or, if applicable, as to a transferring owner, the date of such transfer.
B. Enforcement of Covenants. Developer agrees that: (a) the restrictions contained and described in this Article 6 are reasonable and necessary to protect the legitimate interests of the System and Franchisor, (b) the existence of any claims it may have against Franchisor, whether or not arising out of this Agreement, shall not constitute a defense to the enforcement of the covenants in this Article 6, and (c) Developer's or any Restricted Party's violation of the terms of this Article 6 will cause irreparable injury to Franchisor for which no adequate remedy at law is available and that Franchisor shall be entitled, without bond (which requirement is hereby waived), to preliminary and permanent injunctive relief and damages, as well as an equitable accounting of all earnings, profits, and other benefits arising from such violation, which remedies shall be cumulative and in addition to any other rights or remedies to which Franchisor shall be entitled. Developer shall pay all costs and expenses, including, without limitation, reasonable attorneys' fees, incurred by Franchisor in connection with the enforcement of this Article 6. If Developer or a Restricted Party violates any post-term or post-transfer restriction described in this Article 6, the restrictions contained herein shall remain in effect until two (2) years after Developer or such Restricted Party begins to comply with those restrictions. If Developer contests the enforcement of this Article 6 and enforcement is delayed pending litigation, and if Franchisor prevails, the period of non-competition shall be extended for an additional period equal to the period of time that enforcement of this Article 6 is delayed. Courts are authorized and directed to reduce the scope or duration (or both) of the provision(s) in issue solely to the extent necessary to render it enforceable and/or reasonable and to enforce the provision so revised. Franchisor may, in its discretion and upon written notice, reduce the scope of any covenant not to compete, or any portion thereof, without Developer's consent.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 57–66)
What This Means (2025 FDD)
According to the 2025 Bft Franchise Disclosure Document, Bft Developers (franchisees) are subject to noncompetition restrictions. These restrictions prevent them from engaging in activities deemed competitive with Bft's business. These restrictions are applicable under each Franchise Agreement executed pursuant to the Multi-Unit Agreement.
Specifically, for two years after the expiration or termination of the Multi-Unit Agreement, or after a Developer or owner assigns their interest, they cannot own, maintain, be employed by, lend money to, lease space to, provide services to, or have any involvement with a Competing Business. This restriction applies within the Development Area, within 10 miles outside the Development Area, or within a 10-mile radius of any Bft Studio that is open, under lease, or under development.
Bft also states that the Developer agrees that these restrictions are reasonable and necessary to protect the legitimate interests of the Bft system and that violating these terms will cause irreparable injury to Bft. Bft is entitled to injunctive relief and damages, including an accounting of earnings, profits, and benefits resulting from the violation. The Developer is responsible for all costs and expenses, including attorney's fees, incurred by Bft in enforcing these restrictions. If a Developer violates these post-term restrictions, the restrictions remain in effect for two years after the Developer begins to comply. If enforcement is delayed due to litigation and Bft prevails, the non-competition period will be extended by the length of the delay. Courts can reduce the scope or duration of the restrictions to make them enforceable, and Bft may reduce the scope of any covenant not to compete without the Developer's consent.
However, the FDD also notes that covenants not to compete are generally considered unenforceable in North Dakota, but Bft will enforce them to the maximum extent the law allows. In Washington, a franchisor cannot restrict a franchisee from soliciting or hiring any employee of another franchisee or the franchisor.