What disclosure is required in the Fly To Fit franchise disclosure document regarding restrictive covenants in North Dakota?
Fly_To_Fit Franchise · 2024 FDDAnswer from 2024 FDD Document
of New York.
- The following is added to the end of Item 19:
REPRESENTATIONS REGARDING EARNINGS CAPABILITY
FLY TO FIT FRANCHISE, LLC DOES NOT FURNISH OR AUTHORIZE ITS SALESPERSONS TO FURNISH ANY ORAL OR WRITTEN INFORMATION CONCERNING THE ACTUAL OR POTENTIAL SALES, COSTS, INCOME OR PROFITS OF A FRANCHISE. ACTUAL RESULTS VARY FROM UNIT TO UNIT AND FLY TO FIT FRANCHISE, LLC CANNOT ESTIMATE THE EARNINGS OF ANY PARTICULAR FRANCHISE.
NORTH DAKOTA ADDENDUM TO DISCLOSURE DOCUMENT
In the State of North Dakota only, this Disclosure Document is amended as follows:
THE SECURITIES COMMISSIONER HAS HELD THE FOLLOWING TO BE UNFAIR, UNJUST OR INEQUITABLE TO NORTH DAKOTA FRANCHISEES (NDCC SECTION 51-19-09):
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- Restrictive Covenants: Franchise disclosure documents that disclose the existence of covenants restricting competition contrary to NDCC Section 9-08-06, without further disclosing that such covenants will be subject to the statute.
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Source: Item 23 — RECEIPTS (FDD pages 44–134)
What This Means (2024 FDD)
According to Fly To Fit's 2024 Franchise Disclosure Document, North Dakota has specific requirements regarding restrictive covenants. The North Dakota Securities Commissioner considers it unfair, unjust, or inequitable if Fly To Fit's franchise disclosure documents mention covenants restricting competition without also stating that these covenants are subject to North Dakota Century Code Section 9-08-06. This statute likely places limitations or conditions on the enforceability of such covenants.
To ensure compliance, Fly To Fit includes a North Dakota Rider to its Franchise and Multi-Unit Development Agreement. This rider explicitly states that any contract restraining a franchisee, guarantor, or any other person from practicing a lawful profession, trade, or business is subject to NDCC Section 9-08-06. This means that the standard restrictive covenants in Fly To Fit's franchise agreement are explicitly subordinate to North Dakota law.
This disclosure and rider are important for prospective Fly To Fit franchisees in North Dakota because they clarify that the enforceability of non-compete clauses is governed by North Dakota law, which may offer more protection to the franchisee than the standard terms of the franchise agreement. Franchisees should consult with legal counsel to fully understand their rights and obligations under North Dakota law regarding restrictive covenants.