Does Itan need to post a bond if it seeks injunctive relief for a breach of Section 3?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
re reasonable we may, upon written notice to you, unilaterally modify the brand protection covenants in §3 of this Agreement by limiting the scope of the Prohibited Activities, narrowing the definition of a Competing Business, shortening the duration of the Restricted Period, reducing the geographic scope of the Restricted Territory and/or reducing the scope of any other covenant imposed upon you under §3 of this Agreement to ensure the covenants are enforceable under applicable Law.
- (e) Breach. You agree t
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, Itan does not need to post a bond if it seeks injunctive relief for a breach of Section 3 of the agreement. Itan will notify the franchisee if it intends to seek injunctive relief. However, if a court requires Itan to post a bond despite their mutual agreement to the contrary, the bond amount may not exceed $1,000.
This means that Itan and the franchisee are agreeing that Itan does not need to provide a security deposit to cover potential damages to the franchisee if an injunction is wrongly issued. This is intended to streamline the process of obtaining injunctive relief for Itan in cases where the franchisee violates Section 3, which likely covers critical aspects of the franchise agreement such as protection of confidential information or non-compete clauses.
For a prospective franchisee, this clause favors Itan, as it reduces the financial burden on Itan to obtain an injunction. However, the franchisee has some protection in that the bond amount is capped at $1,000 if the court decides to require a bond. This arrangement is not uncommon in franchise agreements, as franchisors often seek to protect their brand standards and trade secrets efficiently. Franchisees should carefully review Section 3 to understand the obligations that could trigger this clause.