Which state's laws govern the enforceability of post-term covenants against competition in the Fitstop franchise agreement?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
- 19.12 Governing Law. The Parties understand, acknowledge and agree that this Agreement, as well as all claims arising out of or related to the parties' respective obligations and rights hereunder, shall be interpreted and governed by the laws of the State of California without regards to that state's conflicts of law principles, except for any interpretation or analysis with respect to the enforceability of your postterm covenants against competition set forth in Sections 18.2 and 18.3 of this Agreement which the Parties agree and acknowledge shall be governed by the laws of the state where the Franchised Business is located.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, the enforceability of post-term covenants against competition, as detailed in Sections 18.2 and 18.3 of the franchise agreement, is governed by the laws of the state where the franchised business is located.
This means that while the rest of the agreement is interpreted under California law, the specific rules about whether Fitstop can prevent a former franchisee from competing after the franchise ends will depend on the laws of the state where that Fitstop franchise operated. This is a critical point for prospective franchisees, as the enforceability of non-compete agreements varies significantly from state to state.
For example, some states may have stricter requirements for non-compete agreements to be enforceable, such as limitations on the geographic scope or time period. Other states may view such agreements unfavorably and may be less likely to enforce them. Therefore, a Fitstop franchisee needs to understand the specific laws of their state regarding non-compete agreements to fully grasp their obligations after the franchise term.