Florida Court Upholds Non-Compete Clause in a Franchise Law Dispute
Earlier this year, the United District Court Southern District of Florida issued a decision in the case of Peterbrooke Franchising of Am., LLC v. Miami Chocolates, LLC, a lawsuit in which a franchisor and a franchisee were locked in a dispute over the enforceability of a non-compete agreement.
At Pike & Lustig, LLP, our business law team has extensive experience handling a wide range of Florida franchise law issues and contract law disputes, including those involving non-compete agreements. Here, we briefly review the facts of this case and highlight the important lesson for individuals and business considering signing an agreement that contains a non-compete provision.
Case Review: Peterbrooke Franchising of Am., LLC v. Miami Chocolates, LLC
In late 2007, Miami Chocolates (the franchisee) entered into a franchise agreement with Peterbrook Franchising (the franchisor). This agreement allowed the franchisee to open up a Peterbrooke chocolate shop within the City of Miami. Like other franchise agreements, the arrangement granted each party certain rights and responsibilities. Notably, tucked within the franchise agreement was a non-compete clause.
The Non-Compete Clause
The non-compete provision contained the following two key points that would become applicable if the franchise agreement was terminated:
- The franchisee could not operate any competitive business within 25 miles of any Peterbrooke location; and
- The non-compete clause would be active for a period of two years.
Eventually, the relationship did break down. The franchisor went on to sue the franchisee for violating the terms of the non-compete agreement. Miami Chocolates countered by arguing that the non-compete clause was unenforceable under Florida law.
The Court Decision
In reviewing the case, the court ruled in favor of the franchisor. The court highlighted the fact that, under Florida law, non-compete clauses that arise out of franchise agreements are enforceable if they are well-defined and reasonable in the following three areas:
- The scope of time;
- The applicable geographic area; and
- The line of business being restricted.
In this case, the court found that the two-year time limit, 25 mile radius, and restriction to businesses selling ‘gourmet chocolate products’ were all reasonable. Thus, the non-compete was ruled legally valid.
Franchise Law: The Lesson for Florida Businesses
Florida courts are generally skeptical about restraints on commercial trade. However, non-compete clauses will be upheld if they meet all of the required criteria. If your business is considering including a non-compete agreement, you need to be sure that it is sufficiently narrow and is properly drafted. Alternatively, if you are considering sign a contract with a non-compete, please be aware of the fact that it will likely be enforced if it meets the appropriate standards.
Contact Our Miami Business Law Attorneys Today
At Pike & Lustig, LLP, our business litigation lawyers have extensive experience handling cases involving non-compete provisions. To find out more about our legal services, please contact us today for a free consultation. Our law firm has locations in West Palm Beach and Miami, and we represent businesses and individuals all over South Florida.