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If I have signed a preliminary franchise agreement that contained a non compete in it, then after realizing that the Franchisor was not an ethical company that I wanted to invest or have a franchise under, is the non compete of the preliminary binding? I have left a full time gainfull job, moved my family to another state in preparation to open a business. Now, after several disturbing communications with the Franchising company regarding the need for my husband to personaly guarentee my agreement if I sign (after we had said a year and a half ago that he would not) the Franchisor is pressuring my to sign the Franchise agreement and pay them evenmore non-refundable money. They are also requiring that my husband now sign a personal guarentee for future revenue in the event the business (solely in my name) fails. Wewont do it, and so we have a stall mate. I will seek to open a business on my own and not sign the franchise agreement, but they say that they will sue me for non compete if I do. It is a prelim agreement - can they?
Please contact me if you need more information to answer this. I have a contract on land, bank approval to move forward with my business and a short time line to build. I do not want to lose this opportunity (the location) and do not believe that a Non-compete in a preliminary agreement could harm me if I go forward with my plans without the Franchisor. I have NOT been privey to any of their protected business offerings/process/operating models etc. only the preliminary work (mostly on my own) to precure the location I would like my business in. I want to know specifically what I need to do to ensure they cannot try to sure me after I start to build a business. I am also wondering if they are violating any Equal Opportunity Laws given that they (in the 11th hour) before I sign my Franchise agreement, are requiring my husband to personally guarentee even though he is not required to originally sign the preliminary agreement or Franchise agreement? Wat is my recourse to protect myself and keep moving forward before the window of opportunity closes on this piece of land I am in contract for?
The Prelim is fairly short can I send it? The original submittal had a way to attach a file but this does not. Yes, the business would be in the same line of business Childcare.
Can I attached the scanned image to the email I got? It will not also paste into this text box
hi - nothing personal but I need someone with Franchise and non compete experience, so yes please. Also, can we respond to the email with the document to look at?
Thank you for contacting me but I guess then without a means to get you the document via this service website, then I cannot get an answer. This site provided a way to upload/attach a document when you first submit question - is that not available? I do not see that option from this text window that I can reply to.
Hi - yes. It seems that the preliminary agreement (the actual document) did not get to you. I just resent it as a PDF (smaller file size) to the tech support who is assisting. Please review that upon your receipt.
Thank you for your thorough answer. The advice is well received. I will have to ask if there is any possibly consideration in that I located and contracted for the land - not the Franchisor, and did pay them a fee, and I am not yet a signed Franchisee? I guess to be safe regardless I would need some form of declaritive judgement or relief to state that the Franchisor will not or cannot seek future litigation?
Location of the land was only the first step involved in beginning the franchise relationship. What I would do is actually request a release from the Company. They mentioned that they would terminate the agreement and provide you with $10,000.00 back if your terminate the agreement. They also state in the contract that they may grant you a mutual general release which would relieve you of your non-compete obligations. Finally, a Declaratory Judgment Action would work well in this scenario. You would be able to get the non-compete limited. I'd go for the release option first though.
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Good Luck and feel free to write back with any follow up questions you may have. -ZDN
Will do and thank you so much for your extra efforts in this guidance.
You have been very helpful and given me a good start. I wish you all good fortunes in all that you do!
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