Jan 29, 2015 - Blog by |

A post-term restrictive covenant in franchise agreement tripped-up  a “Rogue Franchisee” in London In Oven Clean Domestic Limited v Read (January 2015).

In this case, the High Court in London, in issuing an interim injunction shutting down the franchisee, held that a post termination non-compete obligation in a UK franchise agreement was reasonable and enforceable. Tim Harris, the CEO of OvenClean and Franchise Brands predictably stated “we do not have many disputes with our franchisees and we always try to resolve any issues with franchisees before they escalate. However, every now and then all franchisors have a rogue franchisee who threatens the very core of the franchisor's business.”

The CEO of OvenClean tried to explain why he and OvenClean felt it necessary to put the franchisee out of business: "We do not have many disputes with our franchisees and we always try to resolve any issues with franchisees before they escalate.  However, every now and then all franchisors have a rogue franchisee who threatens the very core of the franchisor's business.  We had to act against [the franchisee] to protect our business and the businesses of all our franchisees.”

Of course the CEO also warned other franchisees about acting in a similarly roguish manner stating the after the case, the franchisor has “a very useful set of precedent documents which will reduce our costs for future applications.” 

Franchisees that find themselves at the other end of a disputed termination are in almost every state subject to enforcement of the restrictive covenant in their agreements. Because these clauses are enforced frequently in emergency proceedings, franchisees and dealers that suspect that termination is afoot should seek the counsel of a franchisee lawyer at the earliest opportunity. 

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