Is the covenant not to compete in the Bhc Multi-Unit Master Franchise Agreement, which extends beyond termination, enforceable under California Law?

According to Bhc's 2025 Franchise Disclosure Document, the enforceability of the non-compete covenant within the Multi-Unit Master Franchise Agreement that extends beyond the termination of the franchise is questionable under California law. Specifically, the California Franchise Addendum states that such provisions "may not be enforceable under California Law."

This statement serves as a warning to potential Bhc franchisees in California. It suggests that if Bhc tries to enforce the post-termination non-compete clause, a court might rule it invalid. This is significant because California law generally disfavors restrictions on a person's ability to work in their chosen profession after a business relationship ends. However, the FDD does not elaborate on the specific circumstances under which such a covenant might be unenforceable, nor does it guarantee that all non-compete provisions are invalid.

Therefore, prospective Bhc franchisees in California should seek legal advice to fully understand the implications of the non-compete clause in their specific situation. They should discuss with an attorney the potential risks and limitations regarding the enforceability of this clause, considering factors such as the scope of the restricted activities, the geographic area, and the duration of the restriction. Understanding these factors is crucial for making an informed decision about investing in a Bhc franchise.