How is the non-competition clause in the Ledgers Franchise Agreement construed in Indiana?
Ledgers Franchise · 2025 FDDAnswer from 2025 FDD Document
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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 law places specific limitations on non-compete agreements within franchise contracts. For Ledgers franchisees in Indiana, any non-competition provisions active upon termination or non-renewal of the Franchise Agreement are restricted to a geographic area no larger than the territory granted in the Franchise Agreement. This is to be interpreted according to Indiana Code 23-2-2.7-1(9).
Specifically, Indiana Code section 23-27-1(9) dictates that a franchisee cannot be bound by a non-compete agreement for more than three years or in an area larger than the exclusive territory granted by the Franchise Agreement. Therefore, in Indiana, a Ledgers franchisee is restricted from engaging in a competing business for only one year within their exclusive franchise territory after the termination of the Franchise Agreement.
These stipulations ensure that Ledgers franchisees in Indiana are not unduly restricted in their ability to pursue other business ventures after their franchise agreement concludes, providing a balance between protecting the franchisor's interests and the franchisee's right to work. This is a more favorable condition for franchisees compared to some states where non-compete agreements can be broader and longer-lasting.