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Franchisor's Non-Compete Upheld In New Jersey

By Cynthia M. Klaus
June 26, 2008

A franchisor of tax preparation franchises was entitled to a 24-month injunction beginning from the time of the former franchisee's compliance with a non-competition covenant. Jackson Hewitt Inc. v. Childress, Bus. Franchise Guide (CCH) ' 13,849 (D. N.J., Jan. 22, 2008). The permanent injunction was ordered when the court granted the plaintiff franchisor's motion for summary judgment.

Terms of Agreements

The franchise agreements obligated the defendant franchisee to comply with certain post-termination covenants, including covenants not to compete and not to use the franchisor's confidential and proprietary information. Under the covenant not to compete, the defendant agreed that for a period of 24 months after termination, he would not 'directly or indirectly prepare or electronically file individual tax returns, teach tax courses, offer Bank Products, or own, engage in, operate [or] manage … a Competing Tax Business … within the Territor[ies] or within an area ten (10) miles outside the boundaries of the Territor[ies].' The confidentiality provision required that after termination, the franchisee would return all trade secret, confidential, and proprietary information. Lists of customers of the franchised businesses were specifically set out as the franchisor's confidential and proprietary information.

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