Is the covenant not to compete in the Degree Wellness Franchise Agreement, which extends beyond termination, always enforceable under California law?

According to Degree Wellness's 2025 Franchise Disclosure Document, the enforceability of the covenant not to compete, which extends beyond the termination of the franchise, is not guaranteed under California law. Specifically, Item 23 of the FDD acknowledges that such provisions in the Franchise Agreement may not be enforceable in California. This is a critical point for prospective franchisees in California to consider.

California law is known to be restrictive regarding non-compete agreements, especially those extending beyond the termination of a business relationship. The statement in the FDD serves as a warning that Degree Wellness may face challenges in enforcing these covenants against franchisees in California. This could impact Degree Wellness's ability to protect its market share and confidential information in the event a franchisee decides to operate a competing business after the franchise agreement ends.

Given this uncertainty, potential Degree Wellness franchisees in California should seek legal counsel to fully understand the implications of the non-compete clause. They should evaluate the specific terms of the covenant, including its duration, geographic scope, and the definition of what constitutes a competitive business. Understanding the limitations and potential risks associated with this clause is essential for making an informed investment decision. Prospective franchisees should also consider this factor when negotiating the terms of their franchise agreement, if possible.

It is also important to note that the FDD highlights that if any provision of the Franchise Agreement is inconsistent with California law, the law will take precedence. This general statement reinforces the specific caution regarding the non-compete clause, advising franchisees to be aware of their rights and protections under California law.