Do the covenants in the Learningrx agreement impose a greater restraint than necessary to protect the goodwill or other business interests of the franchisor?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
han disclosed to Franchisor in writing. Such transfer remains subject to Franchisor's prior written approval and other conditions specified in this Agreement. If Franchisor does not transfer the franchised Business to the transferee on the same terms offered to Franchisor, then Franchisee must again extend the right of first refusal to Franchisor in the manner described above, before another desired transfer.
15. GENERAL PROVISIONS
15.1 Covenants Not to Compete. During the term of this Agreement and for two (2) years after termination, transfer, or expiration of this Agreement for any reason, Franchisee agrees that neither Franchisee, nor any manager of Franchisee, any person associated with Franchisee, including officers, directors, shareholders, partners, members, trustees, employees or agents, and any members of Franchisee's immediate families (collectively "Franchisee Affiliates"), will (i) have any direct or indirect controlling interest as a legal or beneficial owner in a Competitive Business (as hereinafter defined); (ii) perform services as a director, partner, officer, manager, employee, consultant, representative, agent or otherwise for a Competitive Business; or (iii) divert or attempt to divert any business related to, or any customer or account of the LearningRx Training Center, Franchisee's Business, Franchisor's business, the business of any affiliate of Franchisor or any other franchisee licensed by Franchisor, by direct inducement or otherwise, or divert or attempt to divert the employment of any employee of Franchisor or another franchisee licensed by Franchisor, to any Competitive Business by any direct inducement or otherwise. During the term of this Agreement, this Covenant Not to Compete applies anywhere in the United States. For two (2) years after the termination, transfer, or expiration of this Agreement, for any reason, this Covenant Not to Compete applies: (a) within Franchisee's Territory; (b) within counties adjacent to Franchisee's Territory or within a Territory then operated by or under development by Franchisor or another franchisee of Franchisor; (c) within a fifty mile radius from the boundary of Franchisees Territory or from any other franchised or company-owned LearningRx Training Center, (d) on the Internet or (e) on any other Multi-Area Marketing channels used by Franchisor.
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
According to Learningrx's 2025 Franchise Disclosure Document, the franchise agreement includes covenants not to compete that aim to protect the goodwill, unique qualities of the Learningrx system, and the confidentiality and value of its trade secrets. These covenants apply to the franchisee, their managers, individuals associated with the franchisee (including family members), and, in some instances, a Spousal Affiliate. These parties are restricted from engaging in competitive business activities during the term of the agreement and for a specified period after termination. A "Competitive Business" is defined as any business offering learning enhancement, brain training, or cognitive training courses, programs, or products, or math and reading training courses, programs, or products.
During the term of the Learningrx agreement, the non-compete applies anywhere in the United States. After termination, the non-compete extends for two years and is limited to (a) the franchisee's territory, (b) counties adjacent to the franchisee's territory or territories under development by Learningrx or its franchisees, (c) a 50-mile radius from the franchisee's territory or any Learningrx center, and (d) the Internet and multi-area marketing channels used by Learningrx. These restrictions prevent franchisees and related parties from directly competing with Learningrx or its other franchisees, using confidential information gained during the franchise term to unfairly compete, and potentially damaging Learningrx's market position.
The Learningrx agreement also addresses the franchisee's use of Learningrx's numbers, addresses, domain names, locators, directories and listings used to promote the Learningrx system. The franchisee must cease using Learningrx's marks, cancel any assumed name registrations that include Learningrx's marks, assign all domain names and Internet directory listings that contain Learningrx's marks to Learningrx, and refrain from identifying itself as a Learningrx franchisee. The agreement also allows Learningrx to access the franchisee's business and computer systems to verify compliance and conduct audits. These measures ensure that upon termination, the franchisee fully disassociates from the Learningrx brand and system, preventing confusion and protecting Learningrx's brand identity.
These non-compete and related clauses are typical in franchising to protect the franchisor's investment in its brand, system, and trade secrets. The specific terms, such as the duration and geographic scope of the restrictions, are designed to balance the franchisor's need to protect its business interests with the franchisee's ability to pursue other opportunities after the franchise relationship ends. Prospective Learningrx franchisees should carefully review these covenants with legal counsel to understand their implications and ensure they are reasonable under applicable state laws.