Are covenants restricting competition enforceable for a Bonchon franchise in North Dakota, considering Section 9-08-06 of the North Dakota Century Code?

According to Bonchon's 2025 Franchise Disclosure Document, covenants restricting competition in North Dakota, including those in Section 12.02 of the Franchise Agreement ("Covenant Not to Compete"), may be subject to Section 9-08-06 of the North Dakota Century Code. The FDD states that such covenants are generally considered unenforceable in North Dakota. This information is found in the North Dakota Addendum to the Franchise Agreement.

This means that if you operate a Bonchon franchise in North Dakota, the typical non-compete clauses that would prevent you from opening a similar restaurant nearby after leaving the franchise may not be enforceable. This could allow a former franchisee to open a competing business relatively close to an existing Bonchon location, which could impact the existing franchise's revenue.

However, the FDD also states that if any portion of the covenants not to compete are held unreasonable, void, vague, or illegal, the court or agency with jurisdiction is empowered to revise and/or construe the covenants to fall within permissible legal limits. This suggests that while broad non-compete agreements may be unenforceable, a more narrowly tailored agreement might be enforceable. Bonchon franchisees should seek legal counsel to understand the specific enforceability of any non-compete provisions in their agreements.

Prospective Bonchon franchisees in North Dakota should carefully review the North Dakota Addendum to the Franchise Agreement and consult with an attorney to fully understand their rights and obligations regarding non-competition covenants. They should also inquire with the franchisor about any specific instances where non-compete agreements have been enforced or challenged in North Dakota.