Thank you for your patience. I have reviewed the documents you have forwarded to us and have my recommendations stated below to each point you have raised.
Q. Is the non-compete binding given the fact that it is in a "preliminary" agreement and that the franchise agreement is not going to be entered into.
A: The non-compete agreement is multifaceted. In it, you as the applicant agree that you: 1) shall not lease
the land that was identified as a prospective site for the day care center; 2) won't disclose any confidential information; 3) won't contact the Company's employees
, etc.; and 4) won't operate competing business for 2 years.
The non-compete is binding in all cases except for number 4. The attempted non-compete to keep you from operating any competitive business for 2 years is overly broad and would be struck down by a court under the applicable law.
That being the case, from your description of your circumstances, it sounds like you had selected a site for the day care center during the term of the preliminary agreement. Now you wish to terminate the agreement, and continue to develop the site without being under a franchise agreement with the Company.
If you follow your proposed course of action, you will be in violation of your non-compete agreement. While the non-compete as to you running a day care center in general is not enforceable, the non-compete which prevents you from using the same location that you had selected while under the Preliminary Agreement is absolutely enforceable against you. This course of action will most likely cause litigation
. If you wish to avoid litigation, I recommend against doing what you are proposing. If you want to continue on with your plan, you need to be prepared to face a court battle and possibly have to pay damages.
Please let me know if you wish to further discuss this issue.