Are covenants not to compete upon termination or expiration of a Caring Transitions franchise agreement generally enforceable in South Dakota?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchise Agreement to which this addendum is attached is amended as follows to comply with the South Dakota Franchise Act, South Dakota Codified Laws, Title 37, Chapter 37-5B:
-
- Covenants not to compete upon termination or expiration of a franchise agreement are generally unenforceable in South Dakota, except in certain instances as provided by law.
-
- In the event that either party shall make demand for arbitration, the arbitration shall be conducted in a mutually agreed upon site in accordance with Section 11 of the Commercial Arbitration Rules of the American Arbitration Association.
-
- The law regarding franchise registration, employment, covenants not to compete, and other matters of local concern will be governed by the laws of the State of South Dakota; but as to contractual and all other matters, this Agreement and all provisions of this instrument will be and remain subject to the application, construction, enforcement, and interpretation under the governing law of the State of Ohio. Any provision in the franchise agreement restricting jurisdiction or venue to a forum outside of South Dakota or requiring the application of the laws of another state is void with respect to a claim otherwise enforceable under the South Dakota Franchise Act.
-
- To the extent this addendum is inconsistent with any terms or conditions of the Franchise Agreement or exhibits or attachments thereto, the terms of this addendum shall govern.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2025 FDD)
According to Caring Transitions' 2025 Franchise Disclosure Document, covenants not to compete upon termination or expiration of a franchise agreement are generally unenforceable in South Dakota, except in certain instances as provided by law. This information is specifically included to comply with the South Dakota Franchise Act, South Dakota Codified Laws, Title 37, Chapter 37-5B.
This means that after the franchise agreement ends, a franchisee in South Dakota will likely not be legally restricted from competing with Caring Transitions, unless specific legal exceptions apply. This could allow a former franchisee to start a similar business in the same area without facing legal repercussions related to non-compete clauses.
However, the FDD also states that while issues regarding covenants not to compete will be governed by the laws of South Dakota, contractual and all other matters in the franchise agreement will be subject to the governing law of the State of Ohio. Additionally, any provision restricting jurisdiction or venue to a forum outside of South Dakota or requiring the application of the laws of another state is void with respect to a claim otherwise enforceable under the South Dakota Franchise Act. Prospective franchisees should seek legal counsel to fully understand the implications of these provisions and how they interact with South Dakota law.