Franchise agreement restriction

[tonka]

Hi all

I am new to the forum and have had a look through other threads but cannot see anything that resembles my problem.

I am a director of a limited company which is a franchisee. The company is about to come out of that franchise agreement. The agreement has a clause which says
" The franchisee shall not for a period of one year thereafter for any cause or by any means whatsoever be engaged, concerned or interested directly or indirectly in any capacity whatsoever in any business which competes with the Business or in any business similar to the business within the territory"

As the franchise agreement is with the limited comapny, am I prevented from trading in my own name? I could only be competing with the franchisor if they appointed another franchisee in my territory.

Any help or advice appreciated.

Thanks

 

[morrigan]

Basically you need a solicitor who specialises in franchise contracts. Most franchisors will have the legal side of the contract absolutely watertight and if you start competing with them they may well start legal proceedings.
1. While you may have a territory if you start operating in it then it makes it more difficult for them to resell.
2. I believe but stand to be corrected that the customers are not deemed to be yours but the franchisors which is another reason they are likely to take legal action. The 12 month cooling of period is basically to make it difficult for you to compete with them or another franchisee in the future.

 

[The Resolver]

You may well be OK Tonka but depends. I have done many of these Agreements and advised both franchisors and franchisees. If you send me the Agreement I'll give you a quick view gratis.

 

[bovine]

Somewhere in the contract will be a definition of franchisee. This may just reference the ltd co., or may include you. As Resolver says, pop it over to him to check out.

 

[speedysi]

i know from personal experience that franchise companies will try to bully franchisees by threatening legal action at the drop of a hat as the franchisors know that the legal costs involved in fighting the franchise companies can finish off most franchisees. the BFA only exists to serve the interests of the franchise companies as this is where their income comes from. The only way any of this exploitation will change is when a fully independent government regulatory body is set up to protect franchisees. I know personally of several people that have lost their life savings, their homes and even sometimes their families due to unfair franchise companies. The banks have a lot to answer for as they are always telling us how much better you are with a franchise company rather being on your own. Franchise companies even threaten legal action if anyone dares to mention their name on threads such as this.