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What about the post term non-compete clause in California franchise agreements?

Franchisors cannot include non-compete clauses because California law prohibits post term non-competition clauses in Business and Professions Code §16600. So why are they routinely in franchise agreements in California? The short answer is because most franchisors use the same document in all states. However, most franchisors will also have some sort of state addendum which outlines various laws of that state that override sections in the franchise agreement, such as California's B & P Code §16600. The reality is, even without the addendum or any other disclaimer language, such post term non-competition provisions are not enforceable in California, except in connection with a sale of the business, or other minor exceptions. However that is not the end of the story. California franchise law does not prohibit post term non-solicitation clauses, meaning a franchisee could be prevented from soliciting its customers after expiration or termination of the franchise agreement. A post-term non-solicitation clause can be very effective in achieving what a post-term non-competition clause can not. California franchise law also does not prohibit non-solicitation of current and former franchise employees. Finally all franchise agreements will have a confidentiality and/or trade secrets clause basically protecting all proprietary information given to or utilized by the franchisee during the franchise agreement term, from being utilized after the term for any reason. This would include not only the trademarked items, but the operations and all training manuals, and information and even all the marketing materials. Franchisees that are nearing the end of their term or in danger of having their franchise agreement terminated, would be wise to have an experienced California franchise attorney review the post term prohibitions for options and solutions in this regard.

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