Can Chocolate Fish Coffee modify the non-compete restriction to protect its legitimate business interests?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
- (c) Interpretation. The parties agree that each of the foregoing covenants is independent of any other covenant or provision of this Agreement. If all or any portion of the covenants in this Section is held to be unenforceable or unreasonable by any arbitrator or court, then the parties intend that the arbitrator or court modify such restriction to the extent reasonably necessary to protect the legitimate business interests of Chocolate Fish Franchising. Franchisee agrees that the existence of any claim it may have against Chocolate Fish Franchising shall not constitute a defense to the enforcement by Chocolate Fish Franchising of the covenants of this Section. If a Restricted Party fails to comply with the obligations under this Section during the restrictive period, then the restrictive period will be extended an additional day for each day of noncompliance.
Source: Item 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to the 2024 Chocolate Fish Coffee Franchise Disclosure Document, the non-compete covenants can be modified by an arbitrator or court. If any part of the non-compete agreement is deemed unenforceable or unreasonable, the parties intend for the arbitrator or court to modify the restriction. The modification would be to the extent reasonably necessary to protect the legitimate business interests of Chocolate Fish Coffee.
This means that if a franchisee challenges the non-compete agreement in court or arbitration, the arbitrator or court has the power to adjust the terms of the agreement. The adjustment would aim to strike a balance between protecting Chocolate Fish Coffee's business interests and ensuring the restriction is fair and reasonable for the franchisee. This is a fairly standard clause in franchise agreements, as non-competes must be reasonable in scope (geographical area and time) to be enforceable.
Furthermore, the agreement specifies that any claims the franchisee may have against Chocolate Fish Coffee do not constitute a defense against the enforcement of the non-compete agreement. Additionally, if a restricted party fails to comply with the non-compete obligations, the restrictive period will be extended by one day for each day of noncompliance, reinforcing the importance of adhering to the terms of the non-compete agreement.