What happens if an Engel & Volkers franchisee breaches the non-competition provisions in Section 16?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
20.3.6 commits a breach of the non-competition provisions set forth in Section 16 or one of the Principals commits a breach of the Confidentiality Agreement and Covenant Not To Compete;
17.2 Liability to Other Franchisees: Should Franchisee commit a breach of contract by acting contrary to the foregoing provisions, Franchisee shall be liable for payment of compensation to other ENGEL & VÖLKERS System franchisees who may thereby have suffered loss in individual cases.
17.3 Liquidated Damages: In order to preserve the ENGEL & VÖLKERS System in the interest of all franchisees it is necessary to protect the relevant trade secrets and know-how and prevent its disclosure to the competition.
Accordingly, if this Agreement is terminated for Franchisee's breach before the Term expires, in addition to any other remedies available to Franchisor, Franchisee must pay Franchisor an amount equal to the combined monthly average of Royalty fees, National Marketing and Technology Fund contributions, and any other fees due and payable under this Agreement commencing with the Opening Date through the date of termination, multiplied by the lesser of (i) twenty-four (24) months; or (ii) the number of full calendar months remaining in the Term.
16. Non-Competition
16.1 Competition During Term of Agreement: Franchisee hereby agrees not to provide residential or commercial real estate brokerage services, or any component thereof, competing with the ENGEL & VÖLKERS System during the Term (as defined hereinafter), either directly or indirectly, in an employed or a self-employed capacity, for its own account or for the account of a third party, as a proprietor, partner, investor, shareholder, member, director, manager, officer, employee, principal, agent, advisor, consultant, lessor, sublessor or any similar capacity, either from an Approved Location or any other geographic location whatsoever. Moreover, any spouse, domestic partner or immediate family member of any of Franchisee's Principal(s) may not provide residential or commercial real estate brokerage services, or any component thereof, competing with the ENGEL & VÖLKERS System during the Term of this Agreement (as defined hereinafter), either directly or indirectly, in an employed or a self-employed capacity, for its own account or for the account of a third party, as a proprietor, partner, investor, shareholder, member, director, manager, officer, employee, principal, agent, advisor, consultant, lessor, sublessor or any similar capacity, unless such services are outside a seventy five (75) mile radius of any Approved Location of Franchisee.
In addition, during the time periods described above, Franchisee agrees not to divert any business that should be handled by its franchised Residential Real Estate Brokerage to any other person or entity.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, a breach of the non-competition provisions set forth in Section 16 constitutes grounds for termination of the franchise agreement. Specifically, section 20.3.6 states that if a franchisee "commits a breach of the non-competition provisions set forth in Section 16 or one of the Principals commits a breach of the Confidentiality Agreement and Covenant Not To Compete" it can lead to termination.
In addition to potential termination, Engel & Volkers franchisees may face other financial repercussions for violating the non-competition agreement. According to section 17.2, franchisees may be liable for payment of compensation to other Engel & Volkers franchisees who may have suffered a loss as a result of the breach. Furthermore, if the agreement is terminated due to the franchisee's breach, section 17.3 stipulates that the franchisee must pay Engel & Volkers an amount equal to the combined monthly average of Royalty fees, National Marketing and Technology Fund contributions, and any other fees due, multiplied by the lesser of 24 months or the number of full calendar months remaining in the term.
The non-competition clause in Section 16.1 states that during the term of the agreement, the franchisee cannot provide residential or commercial real estate brokerage services that compete with the Engel & Volkers system. This restriction applies to the franchisee, their spouse, domestic partner, or immediate family members, either directly or indirectly, in any capacity, within a 75-mile radius of any approved Engel & Volkers location. The franchisee is also prohibited from diverting business from their Engel & Volkers franchise to any other person or entity.
Engel & Volkers includes these measures to protect its brand, market share, and franchisee network. The liquidated damages clause is not considered a penalty but rather the parties' best estimate of damages resulting from premature termination. Prospective franchisees should carefully review Section 16 and related sections to fully understand the scope of the non-competition obligations and the potential consequences of a breach.