Does Chatime disclose in its franchise disclosure documents that covenants restricting competition are subject to NDCC §9-08-06?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- Item 17(c) will be supplemented by the addition of the following language:
You will not be required to sign a general release upon renewal of the Franchise Agreement or Multi-Unit Development Agreement.
- Item 17(i) will be supplemented by the addition of the following language:
You will not be required to consent to liquidated damages or termination penalties.
- Item 17(r) will be supplemented by the addition of the following language:
All covenants restricting competition are subject to NDCC §9-08-06. Covenants not to compete such as those mentioned above are generally considered unenforceable in the State of North Dakota.
- The language in Item 17(u) will be deleted and replaced by the following language:
Most disputes and claimsrelating to the Franchise Agreement and Multi-Unit Development Agreement will be settled by arbitration under the Arbitration Rules of the American Arbitration Association arbitration service at a location agreeable to all parties.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the document includes amendments specific to North Dakota, addressing concerns raised by the North Dakota Securities Commissioner regarding restrictive covenants. For franchisees in North Dakota, Chatime discloses that all covenants restricting competition are subject to NDCC §9-08-06. Furthermore, the disclosure states that covenants not to compete are generally considered unenforceable in North Dakota.
This disclosure is included in Item 17(r) of the Franchise Disclosure Document, which is supplemented by the addition of specific language for North Dakota franchisees. Additionally, the North Dakota Amendment to the Chatime Franchise Agreement states that the following language will be added at the end of Clause 9.2(2) of the Franchise Agreement: "All covenants restricting competition are subject to NDCC §9-08-06. Covenants not to compete such as those mentioned above are generally considered unenforceable in the State of North Dakota."
For a prospective Chatime franchisee in North Dakota, this means that any non-compete clauses in the franchise agreement are subject to North Dakota law and are likely unenforceable. This could provide more flexibility for the franchisee after the franchise agreement ends, as it may not prevent them from engaging in similar business activities. However, it is important for potential franchisees to consult with legal counsel to fully understand the implications of NDCC §9-08-06 and how it applies to their specific situation.