Is each covenant in the City Wide Non-Compete Agreement considered independent of other covenants?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
Each of the foregoing covenants will be construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Non-Compete Agreement is held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which CITY WIDE is a party, Franchisee will be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Non-Compete Agreement.
- 12.4 Each of the foregoing covenants and the covenants of the Non-Compete Agreement will be construed as independent of any other covenant or provision of this Agreement. Franchisee and all guarantors expressly agree that the existence of any claim they may have against CITY WIDE, whether arising from this Agreement, will not constitute a defense to the enforcement by CITY WIDE of the covenants in this Section.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, each covenant within both the Non-Compete Agreement and the Franchise Agreement is designed to be interpreted as independent of the others. Specifically, Section 12.4 of the Franchise Agreement states that each covenant within the Non-Compete Agreement will be considered separately enforceable. This means that if one part of the agreement is found to be unenforceable, the remaining parts can still be upheld.
This independence clause has significant implications for a City Wide franchisee. It means that even if a franchisee successfully challenges one aspect of the non-compete agreement (perhaps arguing that a specific geographic restriction is unreasonable), other restrictions within the same agreement could still be enforced. This could limit the franchisee's activities post-termination, even if they win a partial legal victory.
Furthermore, Section 5 of the Non-Compete Agreement specifies that if a court deems any portion of the agreement unreasonable, the franchisee is still bound by the maximum duty permitted by law. This ensures that City Wide can enforce the broadest possible restrictions that are legally permissible, even if the original covenant is deemed too broad.
This type of clause is relatively common in franchise agreements, as franchisors seek to protect their business interests while also ensuring that the agreement remains enforceable to the fullest extent possible. Prospective City Wide franchisees should carefully review the Non-Compete Agreement with legal counsel to understand the specific restrictions and their potential impact.