Does the Coffee News agreement allow for restrictive covenants to be considered divisible as to time and region?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
- The parties to this Agreement understand and agree Enforceability. 16.7 that, if any portion of the restrictive covenants set forth in this Agreement is held to be unreasonable, arbitrary, or against public policy, then that portion of those covenants shall be considered divisible as to time and region.
The parties to this Agreement agree that if any court or competent jurisdiction determines that the specified time period or the specified region of application of any covenant is unreasonable, arbitrary, or against public policy, then a lesser time period, geographical area or both, that is determined to be reasonable, non-arbitrary, and not against public policy, may be enforced against the parties hereto.
The parties to this Agreement agree and acknowledge that they are familiar with the present and proposed operations of "Coffee News" Franchises and believe that the restrictive covenants in this Agreement are reasonable with respect to their subject matter, duration, and geographical application.
Notwithstanding that the parties agree that any court of competent jurisdiction may modify the time period or specify geographical area of applicability in this agreement, the parties do not intend that a court be able to modify the payment terms set forth herein.
Source: Item 23 — Receipts (FDD pages 36–118)
What This Means (2025 FDD)
According to the 2025 Coffee News Franchise Disclosure Document, the franchise agreement addresses the enforceability of restrictive covenants. Specifically, it states that if any portion of the restrictive covenants is deemed unreasonable, arbitrary, or against public policy, that portion should be considered divisible in terms of time and region.
This means that if a court finds the original restrictions too broad, it can modify them to be more reasonable. For example, if the non-compete period is initially set for five years and the court deems that excessive, it could reduce it to two years. Similarly, if the restricted geographical area is considered too large, the court can narrow it down to a smaller, more appropriate area. This divisibility clause aims to ensure that the restrictive covenants are fair and enforceable, protecting Coffee News's interests without unduly burdening the franchisee.
The agreement also specifies that the parties involved believe the restrictive covenants within the agreement are reasonable concerning their subject matter, duration, and geographical application. However, this does not prevent a court from modifying the terms if deemed necessary. It's important to note that while the agreement allows for the modification of time period or geographical area, it explicitly states that the payment terms cannot be modified by a court.
For a prospective Coffee News franchisee, this clause offers some reassurance that overly broad restrictions can be adjusted by a court. However, it also highlights the importance of understanding and agreeing with the restrictive covenants at the outset, as disputes may still arise and require legal intervention. Franchisees should seek legal counsel to fully understand the implications of these covenants before signing the agreement.