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Non-Compete Cases: Does Anyone Really Win?

By Charles S. Modell and James M. Susag

Many articles have been written about the enforcement of non-compete agreements in franchise cases. The “textbook” law is clear, and we address that law in this article. However, the message that we in the franchise bar have been sending our clients about the law may not be so clear: Nobody really “wins” these cases ' except the lawyers who take them to court.

Most franchise agreements include two types of covenants not to compete. First, there is an “in-term” covenant that prevents the franchisee from competing with himself and with the system during the term of the franchise agreement. Most franchisors also have a “post-term” covenant that prohibits competition within a certain area (which always includes the location of the former franchised unit) for a period of time following termination or expiration of the franchise agreement.

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