What is the presumed unreasonable length of a non-competition covenant after termination of employment for Cilantro Taco Grill in Washington?
Cilantro_Taco_Grill Franchise · 2024 FDDAnswer from 2024 FDD Document
- 8.5 Reduction of Time or Scope.
If the period of time or the geographic scope specified above, should be adjudged unreasonable in any proceeding, then the period of time will be reduced by such number of months or the geographic scope will be reduced by the elimination of such portion thereof, or both, so that such restrictions may be enforced for such time and scope as are adjudged to be reasonable.
In addition, Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in this Article 8 or any portion thereof, without Multi-Unit Operator's consent, effective immediately upon receipt by Multi-Unit Operator of written notice thereof, and Multi-Unit Operator agrees to forthwith comply with any covenant as so modified.
Source: Item 23 — RECEIPT (FDD pages 52–208)
What This Means (2024 FDD)
According to Cilantro Taco Grill's 2024 Franchise Disclosure Document, the reasonableness of non-competition restrictions is subject to judicial review. Specifically, if a court finds the specified time or geographic scope of the non-compete agreement to be unreasonable, the agreement will be modified to be enforceable for a time and scope deemed reasonable by the court. This applies to the non-competition covenant that extends for two years after termination of employment.
For a prospective Cilantro Taco Grill franchisee, this means that the two-year non-compete period is not absolute. If a franchisee believes the restriction is too broad or long, they can challenge it in court. The court then has the power to reduce the time or geographic area to make it reasonable.
Furthermore, Cilantro Taco Grill retains the right to reduce the scope of the non-compete agreement at its discretion. This provides some flexibility, as Cilantro Taco Grill can proactively adjust the restrictions without requiring the franchisee's consent. This modification becomes effective immediately upon written notice to the franchisee. Franchisees in Washington should be aware that Washington state law may further limit the enforceability of non-compete agreements, regardless of what is stated in the franchise agreement.