How enforceable are the covenant not to compete and the no-poach/non-solicitation covenant in the Cinnaholic Franchise Agreement for franchises operating in California after termination of the franchise?

According to Cinnaholic's 2025 Franchise Disclosure Document, the enforceability of the non-compete and no-poach/non-solicitation covenants in California is uncertain. Specifically, Item 22 notes that "The Agreement contains a covenant not to compete, as well as a no-poach/non-solicitation covenant, which extend beyond the termination of the franchise. These provisions may not be enforceable under California law." This statement suggests that while Cinnaholic includes these covenants in its franchise agreement, their application may be limited or deemed unenforceable in California due to state-specific regulations.

For a prospective Cinnaholic franchisee in California, this means that the enforceability of these covenants is not guaranteed. California law tends to disfavor restrictive covenants, especially those that limit a person's ability to work in their chosen profession. The franchisor acknowledges that these provisions, which would typically restrict a franchisee from operating a competing business or soliciting employees after the franchise agreement ends, might not hold up in court within California.

Given this uncertainty, a potential franchisee should seek legal advice to fully understand the implications of these covenants in California. They should also discuss with Cinnaholic what specific steps the company takes to enforce these covenants and what defenses a franchisee might have under California law. Understanding the practical limitations and potential legal challenges is crucial for anyone considering investing in a Cinnaholic franchise in California.