What happens if the non-compete covenants in the Dryject franchise agreement exceed what is permitted by applicable law?
Dryject Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) It is the express intention of the parties to this Agreement to comply with all laws applicable to the covenants contained in this Agreement.
If any of the covenants contained in this Section are found to exceed in duration, geography or scope those permitted by applicable law, the parties expressly agree that such restrictive covenant may be reformed or modified by the final judgment of a court of competent jurisdiction or other lawful constituted authority to reflect a lawful and enforceable restriction, whether in duration, geography or scope, and that the covenants contained in this Section shall automatically be deemed to be amended and modified so as to comply with the judgment or order of such court or authority to the maximum extent permitted.
Source: Item 8 — BUSINESS RELATIONSHIP (FDD pages 68–229)
What This Means (2025 FDD)
According to the 2025 Dryject FDD, the franchise agreement includes a provision addressing situations where non-compete covenants are found to be overly broad under applicable law. Specifically, the agreement states that if any covenant regarding duration, geography, or scope is deemed excessive by a court or lawful authority, the parties agree that the covenant can be reformed or modified. This means the restriction will be adjusted to be lawful and enforceable, whether in terms of time, area, or activities restricted. The agreement also states that the covenants will automatically be amended to comply with the court's or authority's judgment to the maximum extent allowed.
For a prospective Dryject franchisee, this clause offers a degree of protection. It prevents the entire non-compete agreement from being invalidated if a specific part is found to be too restrictive. Instead, the clause allows for a more reasonable and enforceable restriction to be imposed. This could be beneficial if, for example, the initial agreement prevents competition within a 50-mile radius for two years, but the local law only permits a 25-mile radius for one year. The court could modify the agreement to align with what is legally permissible.
However, it's important to note that the franchisee may still face legal challenges to determine the enforceability of the non-compete agreement. The franchisor also reserves the right to challenge the constitutionality of any state law that declares void or unenforceable any provision contained in the DryJect Management, LLC Franchise Agreement. Franchisees should seek legal counsel to understand the specific non-compete laws in their state and how they apply to the Dryject franchise agreement. This will help them assess the potential risks and limitations associated with the non-compete obligations.