For Ledgers franchises in Indiana, what is the effect of Indiana Code 23-2-2.7-1(9) on provisions relating to non-competition?
Ledgers Franchise · 2025 FDDAnswer from 2025 FDD Document
Agreement.
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- The Indiana Code 23-2-2.7-1 makes it unlawful for a Franchisor to terminate a franchise without good cause or to refuse to renew a franchise on bad faith, as well as providing other protections and rights to the franchisee.
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- In compliance with Indiana Code 12-2-2.7-1(9), any provisions in this Franchise Agreement relating to non-competition upon the termination or non-renewal of the Franchise Agreement shall be limited to a geographic area not greater than the Territory granted in this Franchise Agreement and shall be construed in accordance with Indiana Code 23-2-2.7-1(9).
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- Indiana Code section 23-2-2.7-1(10) prohibits the choice of an exclusive forum other than Indiana.
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- Indiana Code section 23-2-2.7-1(10) prohibits the limitation of litigation. The Indiana Secretary of State has interpreted this section to prohibit provisions in contracts regarding
liquidated damages. Accordingly, any provisions in the Franchise Agreement regarding liquidated damages may not be enforceable.
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Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to Ledgers' 2025 Franchise Disclosure Document, Indiana Code 23-2-2.7-1(9) impacts the non-competition provisions within the franchise agreement for franchises operating in Indiana. Specifically, this Indiana code limits the geographic scope of any non-compete agreement that a Ledgers franchisee might be subject to upon termination or non-renewal of their franchise agreement.
This means that any non-compete clause cannot extend beyond the territory that was originally granted to the franchisee in their franchise agreement. Furthermore, the FDD states that Indiana Code 23-27-1(9) prohibits provisions in contract which require a franchisee to agree to a covenant not to compete with Ledgers for a period longer than three 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, a franchisee cannot be involved in a competing business for one year within their exclusive Franchise Territory.
For a prospective Ledgers franchisee in Indiana, this provides some protection by ensuring that any non-compete obligations are reasonably limited to the geographic area where they operated their franchise. This limitation helps to prevent Ledgers from imposing overly broad restrictions that could hinder the franchisee's ability to earn a living after the franchise relationship ends. It is important for prospective franchisees to understand the specific boundaries of their territory as defined in Schedule 1 of the Franchise Agreement, as this will define the geographic scope of the non-compete restriction.
It is also important to note that Indiana Code 23-2-2.5 and 23-2-2.7 supersedes the choice of law clauses of the Franchise Agreement. This means that Indiana franchise laws will govern the agreement, regardless of any provision stating otherwise. This ensures that Indiana franchisees receive the protections afforded to them under Indiana law.