What is the general enforceability of covenants not to compete for Fitstop franchises in North Dakota?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
FOR THE STATE OF NORTH DAKOTA
Item 17 of the Disclosure Document is supplemented by the following:
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- Any release executed will not apply to the extent prohibited by applicable law with respect to claims arising under the North Dakota Franchise Investment Law.
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- Any covenants not to compete such as those mentioned herein are generally considered unenforceable in the State of North Dakota.
The provision of this Additional Disclosure shall be effective only to the extent, with respect to such provision, that the jurisdictional requirements of the North Dakota Franchise Investment Law are met independently without reference to these Additional Disclosures.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, covenants not to compete are generally considered unenforceable in the State of North Dakota. This information supplements Item 17 of the Disclosure Document. This means that the standard non-compete clauses in the Fitstop franchise agreement may not be upheld by North Dakota courts.
For a prospective Fitstop franchisee in North Dakota, this could be seen as a benefit. After the franchise agreement ends, the franchisee may have more freedom to engage in similar business ventures without legal repercussions from Fitstop due to the non-compete clauses. However, this lack of enforceability could also be viewed as a risk, as other franchisees or former franchisees in North Dakota could potentially open competing businesses nearby without violating their agreements.
It is important to note that the provision regarding the unenforceability of non-compete agreements is effective only to the extent that the jurisdictional requirements of the North Dakota Franchise Investment Law are met independently, without relying on these additional disclosures. This suggests that the specific circumstances and applicable laws at the time would determine the actual enforceability. A prospective franchisee should seek legal counsel to fully understand the implications of this provision and how it applies to their specific situation in North Dakota.