Franchising & Distribution Law Blog

The United States District Court for the Eastern District of Pennsylvania recently enforced a non-compete clause in a franchise agreement and granted a franchisor a preliminary injunction against its former franchisee. The court noted that Pennsylvania law recognizes that a franchisor has a legitimate business interest that can be protected by a non-compete clause, and that there was adequate consideration for the non-compete clause in that the clause was entered into as a condition of the franchise relationship. The court then analyzed if the non-compete clause was “reasonably limited in both time and territory.” The non-compete clause at issue had a duration of two years and the geographic scope of the clause was limited to ten miles from the perimeter of the franchisee’s former territory or the territory of any other franchisee.