What does the Commissioner believe regarding covenants restricting competition in the Extreme Art Studio franchise within the context of North Dakota law?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
Item 17(r) of the FDD and Sections 7 and 15 of the Franchise Agreement disclose the existence of certain covenants restricting competition to which Franchisee must agree. The Commissioner has held that
covenants restricting competition contrary to Section 9-08-06 of the North Dakota Century Code, without further disclosing that such covenants may be subject to this statue, are unfair, unjust, or inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law. The FDD and the Franchise Agreement are amended accordingly to the extent required by law.
Source: Item 23 — RECEIPTS (FDD pages 49–214)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, the North Dakota Commissioner's stance on covenants restricting competition is that they may be considered unfair, unjust, or inequitable if they do not fully disclose that such covenants are subject to Section 9-08-06 of the North Dakota Century Code. This determination falls under Section 51-19-09 of the North Dakota Franchise Investment Law.
For a prospective Extreme Art Studio franchisee in North Dakota, this means that any non-compete clauses in the Franchise Agreement must be carefully reviewed to ensure they comply with North Dakota law. If the covenants restricting competition are deemed unfair, unjust, or inequitable because they lack the required disclosures, they may not be enforceable.
Extreme Art Studio has amended the FDD and Franchise Agreement to reflect this position, ensuring compliance with North Dakota law. Franchisees should consult with a legal professional to fully understand the implications of these covenants and how they are applied within the state.