In North Dakota, are the covenants not to compete in the Carvel Franchise Agreement generally considered enforceable?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: Receipts]
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- A contractual requirement that you sign a general release will not apply to claims you may have under the North Dakota Franchise Investment Law.
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- Covenants not to compete such as those contained in the Franchise Agreement are generally considered unenforceable in the State of North Dakota.
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- The Franchise Agreement contains provisions that may be interpreted as liquidated damages clauses. Under the North Dakota Franchise Investment Law, certain liquidated damages clauses are unenforceable.
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- The Franchise Agreement requires you to waive your right to collect exemplary or punitive damages. This provision may not be enforceable under North Dakota law.
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- The Franchise Agreement requires that you consent to the jurisdiction of a court in Georgia. This provision may not be enforceable under North Dakota Law because North Dakota Law precludes you from consenting to jurisdiction of any court outside of North Dakota.
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- The provisions of the Franchise Agreement on governing law, jurisdiction, and choice of law will not be a waiver of any right conferred on you by the North Dakota Franchise Investment Law.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, covenants not to compete, such as those contained in the Franchise Agreement, are generally considered unenforceable in the State of North Dakota. This information is included in Item 23, Receipts, within the North Dakota Addendum to the Disclosure Document and the North Dakota Addendum to the Franchise Agreement.
This means that if a Carvel franchisee in North Dakota leaves the system, the restrictions that typically prevent them from opening a competing business nearby or soliciting customers/employees may not be upheld in court. This could provide more flexibility for former franchisees but also introduces a risk of increased competition for existing Carvel locations in North Dakota.
Prospective franchisees should be aware of this aspect of North Dakota law and how it might affect their investment and business strategy. While this provision offers some protection to franchisees, it is essential to consult with a legal professional to fully understand the implications and how it applies to their specific circumstances.