Is there an adjustment made annually to the earnings thresholds related to noncompetition covenants for Chesters franchisees and their employees/contractors?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
agreements require a franchisee to reimburse the franchisor for court costs or expenses, including attorneys' fees, such provision applies only if the franchisor is the prevailing party in any judicial or arbitration proceeding.
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- Noncompetition Covenants. Pursuant to RCW 49.62.020, a noncompetition covenant is void and unenforceable against an employee, including an employee of a franchisee, unless the employee's earnings from the party seeking enforcement, when annualized, exceed $100,000 per year (an amount that will be adjusted annually for inflation). In addition, a noncompetition covenant is void and unenforceable against an independent contractor of a franchisee under RCW 49.62.030 unless the independent contractor's earnings from the party seeking enforc
Source: Item 23 — **RECEIPTS (FDD pages 48–197)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, the earnings thresholds related to noncompetition covenants are adjusted annually for inflation. Specifically, for an employee of a Chesters franchisee, a noncompetition covenant is unenforceable if their annualized earnings do not exceed $100,000 per year. For an independent contractor of a Chesters franchisee, the noncompetition covenant is unenforceable if their annualized earnings do not exceed $250,000 per year. These amounts are subject to annual adjustments for inflation.
This means that Chesters franchisees need to be aware of these earnings thresholds when implementing noncompetition agreements with their employees and independent contractors. If an employee or contractor earns less than the specified amount (as adjusted for inflation each year), the noncompetition covenant will not be legally enforceable in Washington. This is particularly important for franchisees operating in Washington, as the disclosure explicitly states that any conflicting provisions in the franchise agreement are void and unenforceable there.
For a prospective Chesters franchisee, this information highlights the importance of understanding state-specific regulations that can impact the enforceability of standard franchise agreement terms. It also underscores the need to stay informed about annual adjustments to these thresholds to ensure compliance with local laws. Franchisees should consult with legal counsel to ensure their noncompetition agreements are compliant and enforceable.