A franchise non-compete clause restricts franchisees from operating a competing business during the franchise term and typically for 1 to 2 years after termination or expiration, within a defined geographic radius. These clauses appear in virtually every franchise agreement and are one of the most negotiated provisions in franchise law. At Lopes Law LLC, we review non-compete clauses as part of every FDD Validation Review ($3,000 flat fee) and routinely negotiate more favorable non-compete terms for franchisee clients.

Understanding your non-compete obligations before you sign a franchise agreement — and before you exit one — is critical. A poorly drafted or overly broad non-compete clause can prevent you from earning a living in your industry for years after your franchise relationship ends. At Lopes Law LLC, we have reviewed non-compete provisions in FDDs for over 200 franchise brands, and we have seen the full range of enforceability issues, negotiation opportunities, and state-by-state variations that affect franchisee rights.

What Is a Non-Compete Clause in a Franchise Agreement?

A non-compete clause — also called a covenant not to compete or restrictive covenant — is a contractual provision that prohibits a franchisee from owning, operating, or having an interest in a business that competes with the franchise system. Non-compete clauses in franchise agreements typically have two components:

• In-term non-compete. During the franchise term, the franchisee cannot operate any competing business. This is almost always enforceable because the franchisee is actively using the franchisor’s trademarks, trade secrets, and operating systems.
• Post-term non-compete. After the franchise agreement ends — whether through expiration, termination, non-renewal, or transfer — the franchisee cannot operate a competing business for a specified period within a specified geographic area. This is the provision that generates the most disputes.

Typical Non-Compete Terms

At Lopes Law LLC, we see the following ranges in the franchise agreements we review:

Non-Compete Element	Typical Range	Most Common
Post-term duration	6 months to 3 years	2 years
Geographic radius	5 to 25 miles	10 to 15 miles
Scope (what is restricted)	Narrow to broad	Same or similar business
Applies to	Franchisee only to all principals	Franchisee + guarantors

The non-compete is disclosed in Item 17 of the Franchise Disclosure Document (FDD), which covers renewal, termination, transfer, and dispute resolution. At Lopes Law LLC, Item 17 is one of the five critical items (along with Items 6, 8, 12, and 19) that receives focused attention in every FDD review.

Are Franchise Non-Compete Clauses Enforceable?

Franchise non-compete clauses are enforceable in most states, but enforceability depends on whether the clause is reasonable. Courts evaluate three primary factors when deciding whether to enforce a non-compete:

1. Reasonable duration. Courts in most states consider 1 to 2 years reasonable for a post-term franchise non-compete. Clauses extending beyond 2 years face increasing judicial skepticism.
2. Reasonable geographic scope. The restricted area must be proportionate to the franchise territory and the nature of the business. A 10-mile radius around a pizza franchise location is more likely to be enforced than a 50-mile radius or a statewide restriction.
3. Reasonable scope of restricted activity. The clause must be limited to activities that actually compete with the franchise system. A non-compete that prohibits a former pizza franchisee from operating any food-related business is likely overbroad. One that prohibits operating a pizza or Italian restaurant within the defined radius is more likely to be upheld.

At Lopes Law LLC, we evaluate non-compete enforceability as part of every FDD Validation Review. If the non-compete is overbroad or likely unenforceable, we advise franchisees on whether and how to negotiate more reasonable terms before signing.

The FTC Non-Compete Rule and Franchise Exemptions

In April 2024, the Federal Trade Commission issued a final rule that would have banned most non-compete agreements nationwide. However, the rule included a specific exemption for franchise relationships. The FTC recognized that franchisor-franchisee non-competes are fundamentally different from employer-employee non-competes because franchisees receive access to proprietary systems, trade secrets, and brand equity in exchange for the non-compete obligation.

Before the rule could take effect, a federal court in the Northern District of Texas (Ryan LLC v. FTC) vacated the rule nationwide in August 2024, holding that the FTC exceeded its statutory authority. As of 2026, the FTC non-compete rule is not in effect, and franchise non-competes continue to be governed entirely by state law.

At Lopes Law LLC, we monitor federal regulatory developments that may affect franchise non-compete enforceability. Even though the FTC rule was vacated, the regulatory landscape continues to evolve, and some states have enacted their own non-compete restrictions. Franchisees should understand both federal and state law when evaluating their non-compete obligations.

What the FTC Rule Means for Franchisees Today

The practical impact of the vacated FTC rule on franchisees is minimal. Franchise non-competes remain legal and enforceable under state law in most jurisdictions. However, the FTC’s attention to non-compete issues has increased awareness among state legislatures, and several states have enacted or proposed new restrictions on non-compete agreements that may indirectly affect franchise non-competes.

How to Negotiate a Franchise Non-Compete Clause

Many franchisees assume that the franchise agreement is a take-it-or-leave-it document. While franchisors do use standardized agreements, non-compete provisions are among the most frequently negotiated terms. At Lopes Law LLC, we use several strategies to negotiate more favorable non-compete terms for franchisee clients:

Narrow the Geographic Scope

If the franchise agreement imposes a 25-mile non-compete radius, negotiate it down to 10 or 15 miles — or request that the restricted area match your franchise territory rather than using a mileage radius. At Lopes Law LLC, we have negotiated geographic reductions in non-compete clauses for franchisees in restaurant, healthcare, and service-based franchise systems.

Shorten the Post-Term Period

A 2-year post-term non-compete is standard, but some franchise agreements impose 3-year restrictions. Negotiate the post-term period down to 1 year if possible, or request that the non-compete period be reduced if the franchise agreement is terminated by the franchisor without cause. At Lopes Law LLC, we routinely negotiate shorter post-term periods, particularly for franchisees who are investing significant capital.

Add Carve-Outs for Existing Businesses

If you already own a business in a related industry, negotiate a specific carve-out that excludes your existing business from the non-compete. For example, if you own an independent restaurant and are buying a franchise for a different restaurant concept, the carve-out would allow you to continue operating your existing restaurant.

Define “Competing Business” Precisely

Many franchise non-competes use broad language like “any business similar to the Franchise.” Negotiate for a precise definition that limits the restriction to businesses offering substantially the same products or services as the franchise system. At Lopes Law LLC, we review the non-compete definition against your specific plans and negotiate language that protects your future options.

Negotiate a Buyout Provision

Some franchise agreements allow the franchisee to buy out of the non-compete by paying a specified amount. If no buyout provision exists, negotiate one. This gives you the option to pay a known cost to be released from the non-compete, rather than facing years of restriction or the uncertainty of litigation.

What Happens If You Violate a Franchise Non-Compete?

Violating a franchise non-compete clause can trigger immediate and severe legal consequences. At Lopes Law LLC, we advise franchisees to understand these consequences before they act — not after. Here is what franchisors typically do when a former franchisee violates a non-compete:

• Temporary restraining order (TRO). The franchisor can seek an emergency court order to shut down your competing business. Courts can issue TROs within 24 to 72 hours of filing, sometimes without advance notice to the franchisee. If the court issues a TRO, you must immediately cease operating the competing business.
• Preliminary injunction. After the TRO, the franchisor typically seeks a preliminary injunction that remains in effect during the litigation. If granted, you cannot operate the competing business until the case is resolved — which could take months or years.
• Monetary damages. The franchisor can seek compensatory damages for lost profits, reduced franchise fees from other franchisees, and brand damage caused by the competition. Some franchise agreements include liquidated damages provisions that specify a fixed dollar amount for non-compete violations.
• Attorney fees. Many franchise agreements include attorney fee-shifting provisions, meaning the losing party pays the prevailing party’s legal costs. If you violate a non-compete and the franchisor prevails, you could be responsible for both your own legal fees and the franchisor’s.

At Lopes Law LLC, we represent franchisees who are considering exiting a franchise and need to understand their non-compete obligations. Our Franchise Dispute Review ($3,000 flat fee) includes a detailed analysis of non-compete enforceability, exit options, and risk assessment.

State-by-State Non-Compete Laws for Franchisees

Non-compete enforceability varies significantly by state. At Lopes Law LLC, we advise franchisees on the specific non-compete laws in their state as part of every FDD review. Here is an overview of how key states treat franchise non-competes:

State	Non-Compete Enforceability	Key Notes
California	Generally unenforceable	Bus. & Prof. Code Section 16600 voids most non-competes; franchise exception debated
New York	Enforceable if reasonable	Courts apply strict reasonableness test; proposed legislation to ban non-competes pending
Illinois	Enforceable with limitations	Illinois Freedom to Work Act (2022) adds income thresholds; franchise non-competes generally exempt
Texas	Enforceable if reasonable	Must be ancillary to an enforceable agreement; franchise non-competes typically qualify
Florida	Strongly enforceable	Fla. Stat. Section 542.335 creates presumption of enforceability; 2 years presumed reasonable
Pennsylvania	Enforceable if reasonable	Courts evaluate on a case-by-case basis; reasonableness of scope, duration, and geography
New Jersey	Enforceable if reasonable	NJ Franchise Practices Act provides additional franchisee protections
Washington	Enforceable with restrictions	2020 law voids non-competes for workers earning under $116,594/yr; franchise exception applies
Colorado	Limited enforceability	2022 law restricts non-competes; franchise non-competes may be treated as business sale exception

At Lopes Law LLC, we serve franchisee clients in all 50 states and analyze non-compete enforceability under the applicable state law. Because many franchise agreements include choice-of-law provisions that designate a specific state’s law to govern the agreement, the state where you operate may not be the state whose law controls your non-compete. We evaluate these choice-of-law provisions and advise franchisees on how they affect enforceability.

California: The Most Franchisee-Friendly State

California is the most significant outlier in non-compete law. Under Business and Professions Code Section 16600, non-compete clauses are generally void and unenforceable. California courts have broadly interpreted this prohibition, and in 2023, the state enacted AB 1076 and SB 699 to further strengthen protections by prohibiting employers from enforcing out-of-state non-competes against California residents.

For franchise non-competes, the analysis is more nuanced. Some courts have distinguished between employment non-competes (which California prohibits) and non-competes arising from the sale of a business interest (which Section 16601 permits). Whether a franchise non-compete qualifies as a business sale restriction depends on the specific terms of the franchise agreement and the circumstances of the franchise relationship. At Lopes Law LLC, we advise California franchisees on this evolving area of law.

Frequently Asked Questions About Franchise Non-Compete Clauses

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Last updated: March 17, 2026