What is the consequence if any part of the Buff City Soap non-compete restrictions is found to be unreasonable?
Buff_City_Soap Franchise · 2025 FDDAnswer from 2025 FDD Document
If any part of these restrictions is found to be unreasonable in time or distance, each month of time or mile of distance may be deemed a separate unit so that the time or distance may be reduced by appropriate order of the court to that deemed reasonable. If, at any time during the two year period following the expiration, termination, or approved Transfer of this Agreement or the date any Principal ceases to be a Principal under this Agreement, Developer or its Principals fail to comply with its obligations under this Section 8(a), that period of non-compliance will not be credited toward satisfaction of the two-year period.
Source: Item 23 — Receipts (FDD pages 69–186)
What This Means (2025 FDD)
According to the 2025 FDD, if any part of Buff City Soap's non-compete restrictions is deemed unreasonable concerning time or distance, each month of time or mile of distance can be considered a separate unit. This allows a court to reduce the time or distance to what is considered reasonable.
This means that a court could adjust the non-compete agreement to be less restrictive, either in terms of how long it lasts or the geographic area it covers. For example, if the original agreement prevents a franchisee from operating a competing business within five miles for two years, a court might reduce this to three miles for one year if the original terms are seen as unreasonable.
Additionally, if a franchisee fails to comply with the non-compete obligations at any point during the two-year period after the agreement ends, the period of non-compliance will not count towards fulfilling the two-year requirement. This ensures that franchisees fully adhere to the non-compete terms, as any violation extends the overall duration of the restriction. This is a fairly standard clause in franchise agreements, intended to protect the franchisor's business interests and proprietary information.