If a covenant restricting competitive activity in the Focalpoint Coaching franchise agreement is deemed unenforceable due to its scope, what will happen?
Focalpoint_Coaching Franchise · 2025 FDDAnswer from 2025 FDD Document
If any covenant which restricts competitive activity is deemed unenforceable by virtue of its scope in terms of area, business activity prohibited, and/or length of time, but would be enforceable if modified, Franchisee and Franchisor agree that the covenant will be enforced to the fullest extent permissible under the laws and public policies applied in the jurisdiction whose law determines the covenant's validity.
If any applicable and binding law or rule of any jurisdiction requires more notice than this Agreement requires of this Agreement's termination or of Franchisor's refusal to enter into a successor franchise agreement, or some other action that this Agreement does not require, or if, under any applicable and binding law or rule of any jurisdiction, any provision of this Agreement or any System Standard is invalid, unenforceable, or unlawful, the notice and/or other action required by the law or rule will be substituted for the comparable provisions of this Agreement, and Franchisor may modify the invalid or unenforceable provision or System Standard to the extent required to be valid and enforceable or delete the unlawful provision in its entirety. Franchisee agrees to be bound by any promise or covenant imposing the maximum duty the law permits which is subsumed within any provision of this Agreement, as though it were separately articulated in and made a part of this Agreement.
Source: Item 22 — Contracts (FDD pages 56–57)
What This Means (2025 FDD)
According to Focalpoint Coaching's 2025 Franchise Disclosure Document, if a covenant restricting competitive activity is deemed unenforceable due to its scope (area, business activity prohibited, or length of time), the agreement between Focalpoint Coaching and the franchisee is that the covenant will be enforced to the fullest extent permissible under the laws and public policies applied in the relevant jurisdiction. This means that a court would likely modify the covenant to make it enforceable, rather than striking it down entirely. The modification would be limited to what is legally allowed.
This clause protects Focalpoint Coaching by ensuring that some form of non-compete agreement remains in place, even if the original terms are too broad. It benefits the franchisee by ensuring that they are only bound by restrictions that are legally sound and reasonable. It is fairly common for franchise agreements to include clauses that allow for the modification of unenforceable provisions to the maximum extent permitted by law.
Furthermore, the FDD states that if any provision of the agreement is deemed invalid, unenforceable, or unlawful under any applicable law, the notice or action required by law will be substituted for the comparable provisions of the agreement. Focalpoint Coaching may modify the invalid or unenforceable provision to the extent required to be valid and enforceable or delete the unlawful provision entirely. The franchisee agrees to be bound by any promise or covenant imposing the maximum duty the law permits, as though it were separately articulated in the agreement.
In essence, Focalpoint Coaching aims to maintain the enforceability of the franchise agreement to the greatest extent possible, adapting to legal requirements while ensuring the franchisee remains bound by the maximum duty permissible under the law. This approach provides a balance between protecting the franchisor's interests and complying with legal standards.