Does the Ledgers franchise agreement contain covenants not to compete which extend beyond the termination of the agreements?
Ledgers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchise Agreement contain covenants not to compete which extend beyond the termination of the agreements.
8.6. Non-Compete and No Solicitation
A. Post-Term.
You will not, during the Term and for a period of two (2) years after expiration or termination of this Agreement ("Restriction Period"), in the Territory or within twenty-five (25) miles of the boundaries of the Territory ("Restricted Market"), own or manage any business that provides prospective clients advisory, compliance, recordkeeping, payroll, or tax services ("Restricted Activities"). This restriction applies even if you sell your Franchise Business**.**
B. No Solicitation
During the Restriction Period, you will not directly or indirectly provide advisory, compliance, recordkeeping, payroll, or tax services to any Client, except through the Franchise Business.
C. Disparagement
During the Restricted Period, you will avoid intentional conduct that leads any existing Client or vendor to modify their relationship to the harm of the Franchise Business.
INDIANA
NOTICE TO PROSPECTIVE FRANCHISEES IN THE STATE OF INDIANA:
Indiana Code section 23-27-1(9) prohibits provisions in contract which require a franchisee to agree to a covenant not to compete with the franchisor for a period longer than three (3) years or in an area greater than the exclusive area granted by the Franchise Agreement upon termination or failure to renew the Franchise Agreement. Accordingly, in the State of Indiana, upon termination of the Franchise Agreement, you cannot be involved in a competing business for one (1) year within your exclusive Franchise Territory.
10.4. Survival
All of the covenants that may require performance after the termination or expirations will survive any termination or expiration of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to Ledgers' 2025 Franchise Disclosure Document, the franchise agreement does include covenants not to compete that extend beyond the termination of the agreement. Specifically, for a period of two years after the expiration or termination of the agreement, the franchisee is restricted from owning or managing any business that provides advisory, compliance, recordkeeping, payroll, or tax services within the territory or within 25 miles of its boundaries. This restriction applies even if the franchisee sells their Ledgers franchise business.
These post-term non-compete obligations also include a non-solicitation clause, preventing the franchisee from directly or indirectly providing the aforementioned services to any client, except through the Ledgers franchise business, during the same two-year restriction period. Additionally, franchisees must avoid intentional conduct that could harm the franchise business's relationships with existing clients or vendors during this period.
It is important to note that the enforceability of these non-compete provisions can vary by state. For example, the FDD states that these provisions may not be enforceable under California law. Similarly, Indiana law restricts the duration and scope of such covenants. Prospective franchisees should carefully review the specific state addenda and consult with legal counsel to understand the enforceability of these clauses in their respective locations. Ledgers also states that all covenants that may require performance after the termination or expirations will survive any termination or expiration of the Agreement.