Regarding Chatime, is an injunction an appropriate remedy for violating the non-compete covenants?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
I acknowledge and agree that without prejudice to any right or remedy available to the Franchisee or the Franchisor:
- (a) damages are not an adequate remedy if a person breaches this Agreement;
- (b) the Franchisee or the Franchisor may apply for and obtain, without the necessity
of posting a bond, injunctive relief if:
- (i) a person breaches or threatens to breach any provision of this Agreement; or
- (ii) it believes a person is likely to or threatening to breach any provision of this Agreement.
6. ENFORCEMENT
- (a) Franchisor is a third-party beneficiary of this Agreement and may enforce it, solely and/or jointly with the Franchisee. I am aware that my violation of this Agreement will cause the Franchisor and the Franchisee irreparable harm; therefore, I acknowledge and agree that the Franchisee and/or the Franchisor may apply for the issuance of an injunction preventing me from violating this Agreement, and I agree to pay to the Franchisee and the Franchisor all the costs it/they incur(s), including, without limitation, legal fees and expenses, if this Agreement is enforced against me.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, injunctive relief is an appropriate remedy for breaches of the franchise agreement, including violations of non-compete covenants. The FDD states that damages may not be an adequate remedy for a breach of the agreement, and therefore, Chatime or the franchisee can seek injunctive relief. This means that if a party violates or threatens to violate any part of the agreement, the other party can ask a court to order them to stop the behavior immediately.
This right to seek an injunction is significant for prospective Chatime franchisees because it offers a mechanism to quickly address potential harm resulting from breaches of the agreement. For instance, if a franchisee violates a non-compete clause, Chatime can seek an injunction to prevent further competitive activities. The franchisee acknowledges that violating the agreement will cause irreparable harm to Chatime and the franchisee, further justifying the use of injunctive relief. The franchisee also agrees to cover all costs, including legal fees, if the agreement is enforced against them.
It's important to note that this right to injunctive relief can be exercised without posting a bond, which is a financial security typically required by courts to cover potential damages if the injunction is later found to be unwarranted. The FDD also clarifies that any claims a franchisee might have against Chatime or another franchisee do not justify violating the franchise agreement. This underscores the importance of adhering to the agreement's terms, even if there are disputes.
However, the enforceability of non-compete covenants can vary by state. For example, the North Dakota addendum to the Chatime Franchise Disclosure Document notes that covenants restricting competition are generally considered unenforceable in North Dakota, as per NDCC §9-08-06. Therefore, prospective franchisees should be aware of the specific laws in their state regarding non-compete agreements and how they might affect the enforceability of these provisions in the Chatime franchise agreement.