After the Face Foundrie franchise is terminated or expires, what non-competition covenants apply?
Face_Foundrie Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchise Agreement contains a covenant not to compete that extends beyond the termination of the Franchise Agreement. These provisions may not be enforceable under Indiana law.
ATTORNEYS' FEES. If the franchise agreement or related agreements require a franchisee to reimburse the franchisor for court costs or expenses, including attorneys' fees, such provision applies only if the franchisor is the prevailing party in any judicial or arbitration proceeding.
NONCOMPETITION COVENANTS. Pursuant to RCW 49.62.020, a noncompetition covenant is void and unenforceable against an employee, including an employee of a franchisee, unless the employee's earnings from the party seeking enforcement, when annualized, exceed $100,000 per year (an amount that will be adjusted annually for inflation). In addition, a noncompetition covenant is void and unenforceable against an independent contractor of a franchisee under RCW 49.62.030 unless the independent contractor's earnings from the party seeking enforcement, when annualized, exceed $250,000 per year (an amount that will be adjusted annually for inflation). As a result, any provision contained in the franchise agreement or elsewhere that conflicts with these limitations is void and unenforceable in Washington.
Covenants not to compete upon termination or expiration of the Franchise Agreement are generally unenforceable in the State of South Dakota.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION OF THE FRANCHISE RELATIONSHIP (FDD pages 51–59)
What This Means (2025 FDD)
According to the 2025 Face Foundrie FDD, the enforceability of non-competition covenants upon termination or expiration of the Franchise Agreement varies by state. In Indiana, such provisions may not be enforceable. In South Dakota, covenants not to compete upon termination or expiration of the Franchise Agreement are generally unenforceable. In Washington, noncompetition covenants are void and unenforceable against an employee, including an employee of a franchisee, unless the employee's earnings from the party seeking enforcement, when annualized, exceed $100,000 per year (adjusted annually for inflation). Additionally, in Washington, a noncompetition covenant is void and unenforceable against an independent contractor of a franchisee unless the independent contractor's earnings from the party seeking enforcement, when annualized, exceed $250,000 per year (adjusted annually for inflation). Any conflicting provision in the franchise agreement is void and unenforceable in Washington.
These state-specific addenda highlight the importance of understanding the legal landscape in the state where the franchise will operate. Franchisees should be aware that even if the franchise agreement contains non-compete clauses, these may not be enforceable in certain states or under certain conditions. This could impact the franchisee's ability to operate a similar business after the franchise agreement ends, or it could protect the franchisee from being unduly restricted by the franchisor.
Prospective Face Foundrie franchisees should consult with legal counsel to fully understand the implications of non-competition covenants in their specific state. They should also inquire about any updates to these laws, as they can change over time. Understanding these restrictions is crucial for planning future business endeavors after the franchise term and for assessing the overall risk and opportunity associated with the Face Foundrie franchise.