In the Cool Binz franchise agreement, if a covenant restricting competitive activity is deemed unenforceable, what factors might cause this?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
If any covenant in this Agreement which restricts competitive activity is deemed unenforceable by virtue of its scope in terms of area, prohibited business activity, and/or length of time, but would be enforceable by reducing any part or all of the covenant, you and we agree that the covenant will be enforced to the fullest extent permissible under the laws and public policies applied in the jurisdiction whose law is applicable to the validity of the covenant.
If any applicable and binding law or rule of any jurisdiction requires a greater prior notice of termination, or refusal to renew, than this Agreement, the prior notice or other action required by such law or rule will be substituted for the notice requirements of this Agreement. Such modification to this Agreement will be effective only in such jurisdiction and this Agreement will otherwise be enforced as originally made and entered into in all other jurisdictions.
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
According to Cool Binz's 2025 Franchise Disclosure Document, a covenant restricting competitive activity might be deemed unenforceable if its scope is too broad in terms of area, prohibited business activity, or length of time. If such a covenant is deemed unenforceable due to its scope, Cool Binz states that the covenant will be enforced to the fullest extent permissible under applicable laws and public policies. This means that a court could reduce the scope of the covenant to make it enforceable.
This provision is fairly standard in franchise agreements. Non-compete clauses are meant to protect the franchisor's business model and customer relationships, but they must be reasonable in scope to be legally enforceable. Factors like the geographic area covered by the restriction, the types of competitive activities prohibited, and the duration of the restriction all play a role in determining whether a non-compete agreement is enforceable.
For a prospective Cool Binz franchisee, this means that while there are restrictions on competitive activities during and after the franchise term, these restrictions are subject to legal review and must be reasonable. If a franchisee believes the non-compete terms are overly restrictive, they may have legal grounds to challenge them. It is important to consult with an attorney to understand the specific enforceability of these covenants in the franchisee's jurisdiction.
Cool Binz also states that if any applicable law requires a greater prior notice of termination or refusal to renew the agreement than what is stated in the agreement, then the requirements of that law will be substituted for the notice requirements of the agreement. This modification will only be effective in the jurisdiction where it is required, and the agreement will otherwise be enforced as originally made in all other jurisdictions.