What happens if a covenant in the Fitstop agreement is deemed unreasonable or unenforceable?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.4 Enforceability and Reasonable Nature of Covenants. The Parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Section is held unreasonable or unenforceable by a court or agency having valid jurisdiction over any final decision to which we are a party that is not appealed, you expressly agree that you will be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Section.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, if a court or agency with jurisdiction deems any portion of a covenant within the agreement unreasonable or unenforceable, the franchisee expressly agrees to be bound by a lesser covenant. This lesser covenant would impose the maximum duty permitted by law, as if it were originally part of the agreement. This ensures that some level of restriction remains in place, to the greatest extent legally possible, protecting Fitstop's interests.
This clause is significant for prospective Fitstop franchisees because it means that even if a specific restrictive covenant is found to be overly broad or legally flawed, the franchisee is still obligated to adhere to a modified, more limited version of that covenant. This could impact the franchisee's ability to engage in certain business activities, employ specific individuals, or operate in certain locations, even after the initial covenant is challenged.
This approach is relatively common in franchising, where franchisors seek to protect their brand, trade secrets, and customer relationships through restrictive covenants. By including a clause that allows for the enforcement of a lesser covenant, Fitstop aims to mitigate the risk that an entire restriction is invalidated, leaving them with no protection at all. Franchisees should carefully consider the scope of these covenants and understand that even if challenged, some form of restriction is likely to remain in effect.