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What is a Non-Compete Clause in a Franchise?

The relationship between franchisee and franchisor is governed by a franchise agreement. Franchise agreements contain franchisee "non-compete" clauses which restrict the types of businesses that franchisees (including their individual owners) may or may not operate and own (a) during the term of the franchise agreement and (b) following the termination or expiration of the franchise agreement.

Typically upon expiration or termination of a franchise agreement, the non-compete contained in the franchise agreement will prohibit the franchisee from operating a business that is similar to the franchise formerly operated by the franchisee.

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