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Franchisee Loses Suit over Non-Compete Clause in Renewal Franchise Agreement

A veterinary hospital franchisor waived the non-compete clause in its original franchise agreement with its franchisee, but when it came time for renewal, the franchisor said no deal unless the franchisee agreed to the non-compete clause. The franchisee had competing businesses that were there at the time of the original contract, disagreed with the newly enforced non-compete clause, and sued the franchisor for breach of contract and other claims. Robinson, DVM v. Charter Practices International, LLC, No. 15-35356 (June 21, 2017)

The district court dismissed the franchisee’s claims and the 9th Circuit affirmed. The court’s decision holds three important lessons:

  1. The renewal provision specifically allowed the franchisor not to renew the original franchise agreement unless the franchisee complied with the non-competition provision in the renewal agreement. …
  2. The renewal provision in the original franchise agreement stated that the renewal agreement would be substantially similar to the franchisor’s then-current form of franchise agreement. It made clear that the terms could differ from the original franchise agreement. …
  3. The franchisor provided notice to the franchisee that it intended to enforce the non-competition provision, and it gave the franchisee an opportunity to disinvest. … — Alexander S. Radus, Fox Rothschild LLP Attorneys at Law

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