Drafting Enforceable Noncompete Covenants in Franchise Agreements

Protecting Against Unfair Business Competition by Franchisees With Noncompete Provisions

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, March 30, 2016

Recorded event now available

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Program Materials

This CLE webinar will provide guidance to business counsel for drafting clear and enforceable noncompete covenants in franchise agreements that protect franchisors from unfair competition and withstand court scrutiny, and for enforcing such clauses in court. The experienced panel will discuss the elements of effective noncompete provisions and review the latest case law developments regarding the enforceability of the clauses in franchise agreements.

Description

Almost all franchise agreements include a provision that requires the franchisee to covenant not to compete with the franchisor during the franchisor-franchisee relationship and after the relationship ends. Noncompete provisions protect the franchisor against the risk that the franchisee will use confidential or proprietary information gained from the franchisor to start a competing business.

Noncompete clauses are a hotly litigated topic. Counsel drafting and negotiating noncompete covenants in franchise agreements must exercise care in structuring the provisions. Counsel must take into account potential enforceability challenges with the clauses, both statutory and contractual.

Courts have refused to enforce noncompete provisions that are overly broad or contain unreasonable restrictions. The reasonableness of a noncompete provision is evaluated based on its duration, geographic scope, and the scope of prohibited activities. The surge in ecommerce businesses has impacted how courts assess the reasonableness of a noncompete’s geographic scope.

Courts have also grappled with such issues as whether a nonsignatory may be bound by a noncompete covenant in a franchise agreement.

Listen as our authoritative panel of business attorneys discusses best practices for drafting clear and enforceable noncompete covenants in franchise agreements. The panel will discuss the features of effective noncompete covenants and review the latest case law developments regarding the validity of noncompete agreements in the franchise context.

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Outline

  1. Policy reasons for and against noncompete agreements
  2. Differences between in-term and post-term noncompetes
  3. Best practices for drafting enforceable noncompete provisions in franchise agreements
  4. Review of recent court decisions on noncompete agreements between franchisors and franchisees
  5. Interplay of franchise noncompetes and nonsolicitation agreements
  6. Interplay with confidentiality agreements and trade secrets
  7. Bankruptcy of franchisee
  8. Enforceability against non-signatories
  9. Litigation strategies: how cases arise, typical strategies, TROs
  10. Differences between states regarding public policy of noncompetes
  11. Professionals and noncompetes

Benefits

The panel will review these and other key issues:

  • What key provisions are typically included in noncompete provisions of franchise agreements?
  • How should noncompete covenants be drafted to avoid being considered unreasonable, overbroad and unenforceable by the courts?
  • What lessons can counsel glean from recent case law to avoid and/or overcome enforcement challenges with noncompetes?

Faculty

William G. Somerville
William G. Somerville

Shareholder
Baker Donelson

Mr. Somerville concentrates his practice in business litigation, including health care litigation, employment law and...  |  Read More

Spandorf, Rochelle
Rochelle (Shelley) Spandorf

Partner
Davis Wright Tremaine

Ms. Spandorf focuses her practice on business franchise and distribution issues, representing franchisors,...  |  Read More

James M. Susag
James M. Susag

Shareholder
Larkin Hoffman

Mr. Susag's trial practice focuses on franchise, dealer and contract disputes, and real estate, construction and...  |  Read More

Mark S. VanderBroek
Mark S. VanderBroek

Partner
Nelson Mullins Riley & Scarborough

Mr. VanderBroek is experienced in franchise law and litigation, intellectual property litigation and...  |  Read More

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