When you sign a franchise agreement, you're usually signing up for a non-compete clause. After the franchise ends, you can't open a competing business for a set period. But how long can that restriction last? How broad can it be? And can you actually challenge it if it's unreasonable?
Why franchisors use non-competes
You'll learn the franchisor's systems, customer relationships, suppliers, and trade secrets. A non-compete prevents you from setting up a competing business using all that knowledge. But from your perspective, after 5 or 10 years building a business, being banned from your industry is career-limiting.
What makes a non-compete enforceable in the UK?
Non-compete clauses must be "reasonable" to be enforceable. Three factors matter: duration (2 years is generally enforceable, 5 years is on the edge, 10+ years is likely unenforceable), geography (a restriction covering your operating area plus a reasonable buffer is likely enforceable, but worldwide restrictions for local businesses are excessive), and field of use.
Negotiating non-compete terms
Push for 2 years max. Argue that 3-5 years is excessive and unenforceable. Restrict it to your operating territory plus a reasonable buffer. Negotiate that non-compete only applies if you breach the agreement or terminate voluntarily. If the franchisor terminates for convenience, no non-compete should apply. Define "competing business" precisely.
Enforcement and reliance on legal challenge
If you breach a non-compete, the franchisor can sue for damages or seek an injunction. But for an injunction to be granted, the franchisor must convince the court that the non-compete is reasonable. If it's clearly excessive, a court will likely refuse. But relying on this is risky. Better to negotiate reasonable terms upfront.
Register with QuickLegalCheck to review your franchise agreement. We'll assess whether your non-compete is reasonable and flag overly restrictive terms.