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If I have signed a preliminary

If I have signed a...

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?

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Answered in 12 minutes by:
8/26/2012
D. WINOGO ESQ.
D. WINOGO ESQ., Attorney
Category: Legal
Satisfied Customers: 4,714
Experience: 10+years of experience in all matters of civil litigation and Hearing Officer/Arbitrator
Verified
Has the company met it's obligations that were set forth in the preliminary agreement? Are you planning on opening the same type of business? And what were the provisions of the non- compete?
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Customer reply replied 5 years ago


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.

You can try to scan it in or cut and paste it.
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Customer reply replied 5 years ago


Can I attached the scanned image to the email I got? It will not also paste into this text box

Customer reply replied 5 years ago
Relist: Other.
I reviewed his profile and current work and although he is likely a fine attorney, the first person who was to respond to us had franchise law experience this attorney does not seem to.
Customer reply replied 5 years ago
Relist: Incomplete answer.
I could not upload docs for him to review and have not heard back or gotten an answer. I opened the question to others and have not been answered yet. What am I to do?
If you want another attorney to review your question, please let me know and i will opt out. If you want me to continue to assist you, let me know.
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Customer reply replied 5 years ago


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


Lisa

TexLaw
TexLaw, Attorney
Category: Legal
Satisfied Customers: 4,430
Experience: Lead trial/International commercial attorney licensed 11 yrs
Verified
Hi Lisa,

I have franchise and non compete experience. The last attorney was on the right track though, we need to look at the non-compete agreement to see if there is anyway you can get out of it.

I'm not sure how to get the text onto this format other than to copy and paste. There's no other way for me to take a look at the text since I'm not allowed to provide you with my personal contact information pursuant to the website's rules.

Let me know if you wish to continue.

Best Regards,
ZDN
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Customer reply replied 5 years ago


Hi


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.


 


 

I'm not sure. Let's refer this to customer service and let the IT team take a look at it. If they can't help you out, we can get you a refund.

Thanks
ZDN
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Hi Lisa,

I've received the scanned copies of the franchise agreements for analysis. Before I launch into these, let me know you still want me to go ahead. Once I hear back from you, please give me several hours to take a look at these and get back to you.

Thanks,
ZDN
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Customer reply replied 5 years ago


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.


 


Thanks!


Lisa

Hi Lisa,

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.

Best Regards,
ZDN
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Customer reply replied 5 years ago


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.

Please remember to rate my answer positively so I might receive credit for my work.

Good Luck and feel free to write back with any follow up questions you may have. -ZDN

TexLaw
TexLaw, Attorney
Category: Legal
Satisfied Customers: 4,430
Experience: Lead trial/International commercial attorney licensed 11 yrs
Verified
TexLaw and 87 other Legal Specialists are ready to help you
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Customer reply replied 5 years ago


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!


 


Cheers,


Lisa

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TexLaw
TexLaw
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Category: Legal
Satisfied Customers: 4,430
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