If a restrictive covenant in the Coffee News agreement is deemed unreasonable, can it be divided?
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 enforceability of restrictive covenants is addressed in the franchise agreement. The agreement stipulates that if any part of the restrictive covenants is considered unreasonable, arbitrary, or against public policy, it will be treated as divisible in terms of time and region. This means that the problematic portion can be separated from the rest of the covenant.
Furthermore, the Coffee News agreement specifies that if a court finds the time period or geographical area of a covenant to be unreasonable, arbitrary, or against public policy, a more limited time period or geographical area may be enforced. This allows a court to modify the covenant to make it reasonable and enforceable, rather than invalidating the entire covenant. The parties involved in the agreement acknowledge that they are familiar with the operations of Coffee News franchises and believe the restrictive covenants are reasonable in terms of subject matter, duration, and geographical scope.
However, the Coffee News agreement explicitly states that while a court can modify the time period or geographical area of applicability, it cannot modify the payment terms outlined in the agreement. This provides clarity that the financial aspects of the agreement are intended to remain unchanged, even if other parts of the agreement are adjusted for enforceability.