A non-compete clause in a franchise agreement can restrict what a franchisee is allowed to do — during the franchise relationship, and often for years after it ends. Understanding the scope of these restrictions before signing is essential, since they can significantly limit future business options.
In-Term vs. Post-Term Non-Competes
- In-term non-competes restrict the franchisee from operating a competing business while the franchise agreement is active — generally the more straightforward and widely enforceable of the two
- Post-term non-competes restrict the former franchisee for a defined period after the agreement ends, whether through expiration, termination, or non-renewal — these are more heavily scrutinized and vary significantly by state
How Florida Treats Non-Compete Enforcement
Florida law (Section 542.335, Florida Statutes) permits reasonable non-compete agreements when supported by a legitimate business interest, such as trade secrets, confidential business information, or substantial customer relationships. Courts evaluate reasonableness based on:
- Duration — Florida law presumes a restriction of 6 months or less to be reasonable, and one longer than 2 years to be unreasonable, for a non-compete not related to the sale of a business
- Geographic scope — must be tied to a legitimate business interest, not broader than necessary
- Scope of restricted activity — narrowly tailored to the specific competing business, not an overly broad restriction on an entire industry
What Franchise Non-Competes Typically Restrict
- Operating, owning, or being employed by any business that is the same as or similar to the franchised business
- Within a defined geographic radius of the former franchise location — or sometimes any location in the franchise system
- For a defined period after termination, transfer, or non-renewal
Negotiating Scope Before You Sign
Franchisors are often unwilling to remove non-compete provisions entirely, since protecting the brand’s system and trade secrets is a legitimate concern. But there may be room to negotiate:
- A narrower geographic radius
- A shorter restricted period
- More precise definition of what counts as a “competing business” — an overly broad definition can inadvertently restrict a former franchisee from working in an entire industry, not just a directly competing concept
Non-Competes and Business Sales
Non-compete terms are treated differently — and generally enforced more broadly — when tied to the sale of a business under Florida law, compared to a standard employment-style restriction. This distinction matters when a franchise is being transferred or sold, since the seller’s ongoing restrictions may be more binding than they’d expect.
Why Review This Before Signing, Not After a Dispute Arises
Non-compete disputes are expensive and disruptive to litigate, and by the time a franchisee wants to challenge one, they’ve often already made a business decision (accepting a new opportunity, for instance) that depends on the outcome. Understanding the actual enforceability and scope of a non-compete before signing the franchise agreement avoids being caught between an opportunity and a legal restriction later.
Reviewing a franchise agreement’s non-compete provisions? Brent A. Levison, P.A. helps prospective and current franchisees understand their restrictions under Florida law. Contact the firm today for a consultation.
The information in this article is provided for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please consult a qualified attorney.