Restrictions on competing with the franchise
Produced in partnership with Fieldfisher LLP
Restrictions on competing with the franchise

The following Commercial guidance note Produced in partnership with Fieldfisher LLP provides comprehensive and up to date legal information covering:

  • Restrictions on competing with the franchise
  • General
  • Confidential information
  • Employees
  • Franchisees
  • Non-competition
  • No poaching
  • Separability of restraints
  • Enforceability of restraints
  • EU and UK competition law
  • more

General

This Practice Note sets out the restrictions that a franchisor typically imposes on a franchisee in order to protect the franchisor’s business, including use of the franchisor’s confidential information, obligations not to compete with the franchisor’s business (restrictive covenants), no poaching provisions, severability and enforceability of restraints, and practical guidance on drafting restrictive covenants.

The grant of franchises will typically involve a franchisor disclosing confidential information to:

  1. actual and prospective franchisees (including unit franchisees, master franchisees and developers), and

  2. employees and agents of the franchisees

Such confidential information will include the method underlying the franchised concept and related know-how, etc. Misuse by a recipient, particularly in competition with the franchisor, could be very damaging to the franchisor’s business.

The franchisor must, therefore, try to prevent recipients of such information from disclosing it for unauthorised purposes, including using it to compete with the franchisor’s business. Such restrictions must apply to franchisees and their employees during and after the term of the franchise agreement. The best way of doing this is to secure a direct undertaking from each franchisee and employee; this, however, is likely to be practicable only for the franchisee and its key employees. The franchisee should agree to obtain and, if required, enforce equivalent undertakings from all non-key employees to whom they disclose information.

Confidential information

English law implies