If a court determines that the specified region of application of any covenant in the Coffee News agreement is unreasonable, what may be enforced against the parties?
Coffee_News Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Coffee News's 2025 Franchise Disclosure Document, if a court finds that the specified time period or geographical region of any covenant is unreasonable, arbitrary, or against public policy, a lesser time period or geographical area, or both, may be enforced against the parties. This modified enforcement must be determined by the court to be reasonable, non-arbitrary, and not against public policy. This clause ensures that restrictive covenants, such as non-compete agreements, are not entirely invalidated if a specific aspect is deemed too broad. Instead, the court can narrow the scope to make it enforceable.
This provision is included in the Coffee News franchise agreement to balance the protection of the franchisor's interests with the franchisee's ability to conduct business. It acknowledges that initial restrictions might be overly broad and allows for judicial modification to achieve a fairer outcome. The agreement also states that the parties believe the restrictive covenants within the agreement are reasonable concerning their subject matter, duration, and geographical application.
For a prospective Coffee News franchisee, this means that if a non-compete clause or other restrictive covenant seems overly restrictive, there is a possibility that a court could modify it to a more reasonable scope rather than striking it down completely. However, the agreement also specifies that the parties do not intend for a court to modify the payment terms set forth in the agreement.