Franchise Restrictive Covenants in Georgia

You likely have legitimate business reasons for incorporating a restrictive covenant in the agreements you have with your franchisees. Those covenants seek to keep franchisees from using your trade secrets and business model for the benefit of businesses that compete with you. Yet, if you do not draft those covenants carefully, you might discover during a dispute over your franchise contract that a court will decline to enforce the restrictions you imposed.

A court that views a covenant as being too broad will generally refuse to enforce it in ways that ban individuals from using their general business skills, knowledge, and experience to earn their livelihood. The franchise litigation attorneys at Franchise.Law can help you to draft franchise restrictive covenants in Georgia that protect your business without impinging on a franchisee’s legitimate opportunities. Our lawyers, who are licensed in North Carolina and Florida, help franchisors across the country draft covenants that meet the state standards governing restrictive covenants in their franchise agreements.

When Will a Franchise Restrictive Covenant Be Enforceable?

Regardless of whether the franchise restrictive covenant you need to enforce in a contractual dispute applies to a franchisee’s in-term or post-term business activities, a Georgia court will first analyze it under the Georgia Restrictive Covenants Act (GRCA), which applies to agreements entered into on or after May 11, 2011 and is codified at Official Code of Georgia Annotated §§ 13-8-50 through 13-8-59. Specifically, a court will ask:

• Does the covenant include reasonable limits on its duration? Under O.C.G.A. 13-8-57(c), a post-term restraint of three years or less against a franchisee is presumed reasonable, and a longer restraint is presumed unreasonable
• Does it include a legitimate geographic region in which the franchisee cannot open a competing business?
• Are the scope and definition of the restricted activities tied to the franchisor’s operations?
• Does it impose blanket restrictions that would bar the franchisee from performing any services for a competitor, even services unrelated to the franchisor’s main business?

Drafting a covenant that survives a challenge during a contract dispute requires the knowledge and expertise of an attorney who understands how Georgia courts treat restrictive covenants. The lawyers at Franchise.Law have that knowledge and expertise.

Will a State Court Modify a Restrictive Covenant?

The GRCA authorizes Georgia courts to amend the terms of an unenforceable franchise restrictive covenant to bring it into compliance with the law. The state has imposed limits on how a court can accomplish that:

• A judge can delete or limit overly-broad restrictive covenant provisions, but cannot draft or insert new terms and conditions into the covenant
• A court’s revisions cannot enhance any of the covenant’s restrictions, but can only make them less onerous
• Open-ended restrictive covenants that omit critical limits such as a geographic scope are more likely to be voided in their entirety

Your franchise will take significant risks if it imposes strong contractual restrictions with an expectation that if they are challenged, a court will rewrite them to make them more reasonable. Consult with the attorneys at Franchise.Law if you perceive any problems with the enforceability of your covenants. You will always be in a better position if you proactively manage the contracts and agreements in your FDD rather than ceding that option to a court.

Call Franchise.Law for Additional Advice About Georgia Franchise Restrictive Covenants

The attorneys at Franchise.Law focus their efforts on helping franchisors in Georgia and elsewhere to grow their businesses throughout the United States and beyond. We gear our services to avoid contractual disputes over restrictive covenants, and represent franchisors in litigation and arbitration involving franchise restrictive covenants in Georgia. Contact us today to schedule a meeting with one of our franchisor lawyers.