What is the significance of Section 9-08-06, N.D.C.C., regarding restrictive covenants in Brueggers Bagels franchise disclosure documents?

According to the 2025 Brueggers Bagels Franchise Disclosure Document, Section 9-08-06 of the North Dakota Century Code (N.D.C.C.) concerns restrictive covenants. The North Dakota Securities Commissioner views franchise disclosure documents as unfair, unjust, or inequitable if they contain covenants restricting competition that run contrary to Section 9-08-06, N.D.C.C., without explicitly stating that these covenants are subject to this statute. This means that Brueggers Bagels must disclose that any restrictive covenants in their franchise agreements applicable in North Dakota are subject to North Dakota law.

For a prospective Brueggers Bagels franchisee in North Dakota, this is significant because it ensures that any restrictions on their ability to compete with Brueggers Bagels, either during or after the franchise term, are governed by North Dakota law. This protects the franchisee from potentially overbroad or unfair restrictions that might otherwise be imposed. It also means that North Dakota courts and regulators will scrutinize these covenants to ensure they are reasonable and do not unduly restrain trade.

This requirement is part of a broader effort by North Dakota to protect franchisees from unfair or inequitable practices. The FDD lists several other provisions that the North Dakota Securities Commissioner considers unfair, including clauses related to arbitration location, forum restrictions, liquidated damages, choice of law, jury trial waivers, waivers of damages, general releases, claim limitations, and enforcement cost allocation. Brueggers Bagels addresses these concerns by including a North Dakota addendum to the franchise agreement.

Therefore, prospective Brueggers Bagels franchisees in North Dakota should carefully review the franchise agreement and the North Dakota addendum to understand their rights and obligations regarding restrictive covenants and other potentially contentious issues. They should also consult with an attorney familiar with North Dakota franchise law to ensure that the agreement is fair and complies with state law.