Are covenants restricting competition, such as those in Section 12.02 of the Bonchon Franchise Agreement, generally enforceable in North Dakota?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
Covenants restricting competition in the State of North Dakota, such as those found 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.
Covenants not to compete such as those mentioned above are generally considered unenforceable in the State of North Dakota.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, covenants restricting competition, including those in Section 12.02 of the Franchise Agreement, are generally considered unenforceable in the State of North Dakota. This is due to North Dakota Century Code Section 9-08-06, which may apply to these covenants. This information is specifically outlined in the North Dakota Addendum to the Franchise Agreement.
For a prospective Bonchon franchisee in North Dakota, this means that the non-compete clauses in the franchise agreement may not be legally binding. Typically, these clauses restrict a franchisee's ability to engage in a similar business during and after the franchise term, within a certain geographic area. However, because these covenants are generally unenforceable in North Dakota, a franchisee might have more freedom to operate a competing business after their franchise agreement ends.
It is important to note that while the FDD states that such covenants are generally unenforceable, the specific interpretation and application of North Dakota law can depend on the particular circumstances and legal precedents at the time. Therefore, a Bonchon franchisee should consult with a legal professional in North Dakota to fully understand their rights and obligations regarding non-compete agreements. This will help ensure they are making informed decisions about their business activities, both during and after the franchise term.
Bonchon's Franchise Agreement Section 12.02 outlines the covenant not to compete, stating that during the Initial Term and any Successor Term, and for two years after termination or expiration, the franchisee cannot engage in a Competitive Business within a 20-mile radius of their Restaurant Location or any other Bonchon Restaurant. A Competitive Business is defined as one that offers or sells Korean fried chicken or derives 25% or more of its gross revenues from selling chicken. Despite this clause, the North Dakota Addendum indicates that this may not be enforceable.