Does the Degree Wellness franchise disclosure document disclose the existence of covenants restricting competition, and if so, does it further disclose that such covenants will be subject to N.D. Cent. Code § 9-08-06?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
North Dakota Securities Department requires the following statement to be included in the Disclosure Document:
THE SECURITIES COMMISSIONER HAS HELD THE FOLLOWING TO BE UNFAIR, UNJUST OR INEQUITABLE TO NORTH DAKOTA FRANCHISEES (N.D. Cent. Code § 51-19-09):
- A. Restrictive Covenants: Franchise disclosure documents which disclose the existence of covenants restricting competition contrary to N.D. Cent. Code § 9-08-06, without further disclosing that such covenants will be subject to the statute.
Source: Item 23 — Receipts (FDD pages 66–257)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, the document addresses restrictive covenants and their potential conflict with North Dakota law. Specifically, the FDD acknowledges that the North Dakota Securities Department may consider it unfair or unjust if a franchise disclosure document includes covenants restricting competition without also stating that these covenants are subject to N.D. Cent. Code § 9-08-06. This indicates that Degree Wellness is aware of the legal requirements in North Dakota regarding non-compete agreements.
For a prospective Degree Wellness franchisee in North Dakota, this disclosure is crucial. It means that any non-compete clauses in the franchise agreement must comply with North Dakota law, which may limit their enforceability. The FDD highlights that North Dakota franchisees should be aware that restrictive covenants are subject to the statute.
This disclosure serves as a warning and a point of negotiation for potential franchisees. They should carefully review the non-compete provisions in the franchise agreement and understand their rights under North Dakota law. It would be prudent for a prospective franchisee to seek legal counsel to ensure that the non-compete provisions are fair and enforceable within the bounds of North Dakota law.