Are the covenants in the Learningrx agreement considered reasonable limitations?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
WHEREAS, Area Developer understands and acknowledges the importance of Franchisor's uniformly high standards of quality and service and the necessity of operating the Centers in strict conformity with Franchisor's quality control standards and specifications.
NOW THEREFORE, the parties, in consideration of the promises, undertakings and commitments of each party to the other party set forth herein, hereby mutually agree as follows:
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
According to Learningrx's 2025 Franchise Disclosure Document, the Area Developer acknowledges that they understand and accept the terms, conditions, and covenants contained in the agreement as being reasonably necessary. This necessity is to maintain Learningrx's high standards of quality and service and the uniformity of those standards at all facilities which operate pursuant to the System and thereby to protect and preserve the goodwill of the System and the Marks.
The Learningrx agreement includes covenants not to compete, which restrict the franchisee and their affiliates from engaging in competitive businesses during the term of the agreement and for a period after termination. During the agreement, the non-compete applies anywhere in the United States. After termination, the non-compete applies for two years within the franchisee's territory, adjacent counties, within a 50-mile radius of any Learningrx center, on the Internet, and on any other Multi-Area Marketing channels used by Learningrx.
For the Area Developer agreement, post-term competition is restricted for two years within a fifty (50) mile radius of the Development Territory or the location of any area developer, or any company-owned franchised Center under the System which is in existence on the date of expiration or termination of this Agreement. However, Sections 9.01 and 9.02 shall not apply to ownership by Area Developer of less than a five percent (5%) beneficial interest in the outstanding equity securities of any publicly held corporation.
These covenants aim to protect Learningrx's market position, trade secrets, and customer relationships. Prospective franchisees should carefully consider the scope and duration of these restrictions, as they could limit their future business opportunities after the franchise agreement ends. It is advisable to seek legal counsel to fully understand the implications of these covenants and whether they are enforceable in the franchisee's jurisdiction.