November 20, 2009, Newsletter Issue #104: Limit Competition

Tip of the Week

We live in a free market society and no matter how novel your product or service is you will still have competition. You don’t want to train your competition. It is imperative that you require a Confidentiality and Non-compete Agreement from your franchisees. This should be referred to in the Uniform Franchise Offering Circular (UFOC) and be a separate attachment in the Franchise Agreement.

The Confidentiality and Non-compete Agreement requires the Franchisee to agree:

Not to disclose any confidential or proprietary information learned during training and employment. This applies during the training period and operation periods and indefinitely thereafter. To return all written, printed or electronic information upon termination. Not to open or consult in a competing business while under contract and for 2 years after termination of contract. That while under contract the franchisor has exclusive rights to all ideas, improvement and innovations relating to the franchise business. That the obligations under this Agreement are binding for their heirs and personal representatives. Your attorney may add legal verbiage to the Agreement that protects you from differing laws in other states. Example: “If a Court finds this Agreement to be invalid or unenforceable because it is too broad in any respect, this Agreement may be narrowed by the Court to the extent required to be enforceable.”

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