What laws and policies determine the validity of a covenant restricting competitive activity in the Focus Cfo franchise agreement?
Focus_Cfo Franchise · 2025 FDDAnswer from 2025 FDD Document
Except as expressly provided to the contrary in this Agreement, each section, paragraph, term, and
provision of this Agreement is severable, and if, for any reason, any part is held to be invalid or contrary to or in conflict with any applicable present or future law or regulation in a final, unappealable ruling issued by any court, agency, or tribunal with competent jurisdiction, that ruling will not impair the operation of, or otherwise affect, any other provisions of this Agreement, which will continue to have full force and effect and bind the parties. 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 agrees 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.
Source: Item 23 — Receipts (FDD pages 37–126)
What This Means (2025 FDD)
According to the 2025 Focus Cfo Franchise Disclosure Document, the validity and enforceability of covenants restricting competitive activity are determined by the laws and public policies of the jurisdiction whose law governs the covenant's validity. If a covenant restricting competitive activity is deemed unenforceable due to its scope (area, prohibited business activity, or time length), but would be enforceable if modified, the franchisee agrees that the covenant will be enforced to the fullest extent permissible under the laws and public policies of the relevant jurisdiction. This ensures that Focus Cfo can enforce non-compete agreements to the maximum extent allowed by law.
For Focus Cfo franchisees in North Dakota, the FDD includes an addendum acknowledging that covenants not to compete are generally considered unenforceable in that state. However, this addendum does not appear to apply to franchisees in other states.
Generally, non-compete clauses are included in franchise agreements to protect the franchisor's business model, trade secrets, and customer relationships. The enforceability of these clauses can vary significantly depending on state laws, with some states being more lenient than others. Prospective Focus Cfo franchisees should be aware of the specific laws governing non-compete agreements in their jurisdiction and how those laws might affect their obligations under the franchise agreement.