Are covenants restricting competition, such as those found in Item 17(r) of the Franchise Disclosure Document, Section 12.02 of the Franchise Agreement, and Section 11.01 of the Area Development Agreement, generally enforceable for Bonchon franchises in North Dakota?

According to Bonchon's 2025 Franchise Disclosure Document, covenants restricting competition may not be enforceable in North Dakota. Specifically, Item 23 clarifies that covenants restricting competition, such as those in Item 17(r) of the Franchise Disclosure Document, Section 12.02 of the Franchise Agreement, and Section 11.01 of the Area Development Agreement, may be subject to Section 9-08-06 of the North Dakota Century Code.

The FDD explicitly states that covenants not to compete mentioned in those sections are generally considered unenforceable in North Dakota. This means that if a Bonchon franchisee in North Dakota were to leave the franchise system, the restrictions preventing them from engaging in a similar business might not hold up in court.

This unenforceability could be a significant benefit for franchisees in North Dakota, as it provides them with more flexibility and options after leaving the Bonchon system. However, it also means that Bonchon may have limited legal recourse if a former franchisee opens a competing business nearby. Prospective franchisees should consult with legal counsel to fully understand the implications of this provision in North Dakota.