After termination of the Learningrx Area Developer Agreement, where does the covenant not to compete apply geographically?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Area Developer's Development Territory; (b) within counties adjacent to the Development Territory or within a Development Territory then operated by or under development by Franchisor or another Area Developer of Franchisor; (c) within a fifty (50) mile radius from the boundary of Area Developer's Development 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 covenant not to compete applies geographically for a period of two years after the termination, transfer, or expiration of the Area Developer Agreement. This restriction is in place regardless of the reason for termination.
The geographic scope includes (a) within the Area Developer's Development Territory, meaning the specific region assigned to the developer; (b) within counties adjacent to the Development Territory, extending the restriction to neighboring areas, or within a Development Territory then operated by or under development by Learningrx or another Area Developer; (c) within a fifty (50) mile radius from the boundary of the Area Developer's Development Territory or from any other franchised or company-owned LearningRx Training Center, creating a buffer zone around existing centers; (d) on the Internet, preventing online competition; and (e) on any other Multi-Area Marketing channels used by Learningrx, restricting competition through shared marketing platforms.
This means that after leaving the Learningrx system, an Area Developer is significantly limited in their ability to engage in a similar business within their former territory and surrounding areas. The restrictions also extend to online activities and marketing channels, preventing the developer from leveraging digital platforms to compete with Learningrx. A prospective franchisee should carefully consider the implications of these restrictions before entering into an agreement, as they could significantly impact their future business opportunities.
The agreement specifies that these restrictions are in place to protect Learningrx's goodwill, trade secrets, and the unique qualities of its system. The franchisor can modify the scope of the covenant, reducing it at their discretion with written notice to the Area Developer. The Area Developer also agrees to have their "Franchisee Affiliates" sign a Confidentiality and Covenant Not to Compete Agreement.