Is the covenant not to compete in the Southern Steer Franchise Agreement, which extends beyond the termination of the franchise, always enforceable under California law?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) Post-Term Covenant Not to Compete. For a period of 24 months after the later of (i) the termination, transfer, assignment or expiration of this Agreement; or (ii) the entry of a final order by an arbitrator or a court of competent jurisdiction enforcing this covenant, neither the Franchisee, the Owners, or the Recipients will, on their own account or as an employee, principal, agent, franchisee, independent contractor, consultant, affiliate, licensee, partner, officer, director, shareholder, member, manager, or owner of any other person or Entity, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in or assist any person or Entity engaged in any Competitive Business or Competitive Activity within:
- (i) the Franchised Location;
- (ii) the Protected Area;
- (iii) within 50 miles of the outer boundaries of the Protected Area;
- (iv) within 50 miles from the Franchised Location;
- (v) within 50 miles of any other Southern Steer Business, or (vi) within any Protected Area or territory granted by the Franchisor pursuant to a Multi-Unit Development Agreement, franchise agreement, license agreement or other territorial agreement.
(c) Acknowledgements.
- (i) The Franchisee, and each Owner, and the Recipients expressly agree that the nature of the Franchisor's Southern Steer Business is such that if they were to directly or indirectly own or operate a Competitive Business or engage in Competitive Activity it would be virtually impossible for the Franchisee, the Owner or the Recipients to not to rely on or use the Confidential Information and Trade Secrets.
Source: Item 5 — and 7 of the FDD, Section 3.1 of the Franchise Agreement and Section 4.1 of the Multi-Unit Development Agreement are hereby amended to state that payment of the initial franchise fee and development fee will be deferred until We have satisfied Our pre-opening obligations, and You have commenced business operations. (FDD pages 168–290)
What This Means (2025 FDD)
Based on the 2025 Southern Steer Franchise Disclosure Document, the enforceability of the post-term covenant not to compete is not explicitly addressed under California law within the provided excerpts. However, the agreement does include non-compete clauses that extend beyond the termination of the franchise agreement.
The Franchise Agreement states that for 24 months after termination, neither the franchisee, owners, nor recipients can engage in any Competitive Business or Competitive Activity within the Franchised Location, Protected Area, or within 50 miles of these locations or any other Southern Steer Business. The franchisee, owners, and recipients acknowledge that operating a Competitive Business would make it virtually impossible not to rely on the Confidential Information and Trade Secrets of Southern Steer.
Without specific details on California law, prospective Southern Steer franchisees should consult with legal counsel to understand the enforceability of these non-compete provisions in California. Factors influencing enforceability often include the reasonableness of geographic scope, time duration, and the nature of the restricted activities, as well as specific state laws governing non-compete agreements.