Is the covenant not to compete in the Cool Binz Franchise Agreement, extending beyond termination, always enforceable under California law?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
The following paragraphs are added at the end of Item 17 of the Disclosure Document:
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- California Law Regarding Termination and Non-Renewal. California Business and Professions Code Sections 20000 through 20043 provide rights to you concerning termination, transfer or non-renewal of a franchise. If the Franchise Agreement contains any provision that is inconsistent with the law, the law will control. The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
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- Non-Competition Covenants. The Franchise Agreement contains a covenant not to compete that extends beyond the termination of the franchise. This provision may not be enforceable under California law.
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
According to the 2025 Cool Binz Franchise Disclosure Document, the enforceability of the non-compete covenant extending beyond the termination of the franchise agreement is not guaranteed under California law. Specifically, an addendum to the franchise agreement addresses California law, stating that if there is a conflict between the addendum and the franchise agreement, the addendum will take precedence.
The addendum explicitly acknowledges that the non-competition covenant within the Cool Binz Franchise Agreement, which extends beyond the termination of the franchise, may not be enforceable under California law. This is a critical point for prospective franchisees in California to understand.
This acknowledgment suggests that California's legal framework regarding non-compete agreements may impose restrictions or conditions that could render the covenant unenforceable. Therefore, a Cool Binz franchisee in California should be aware that the enforceability of the non-compete clause is subject to legal interpretation and may not be fully upheld by California courts.