Franchise Non-Compete Clauses: How to Read Yours

A franchise non-compete clause restricts you from running a competing business — during the franchise term and for a set period after it ends — and whether the post-term part is enforceable comes down to state law and reasonableness, not any federal rule. These clauses (also called restrictive covenants) protect the franchisor’s brand, goodwill, and trade secrets. As a franchisee, your job is to read exactly what the clause covers before you sign, because it can shape your options for years after you leave the system.

One thing that changed: there is no federal ban

You may have heard the FTC tried to ban non-competes. It did issue a rule in 2024, but courts blocked it, and in September 2025 the FTC dropped its appeals and the rule was vacated. As of mid-2026, there is no federal non-compete ban — enforceability is governed by each state’s law, exactly as it was before. So when you evaluate a franchise non-compete, the question is always: what does my state’s law allow, and is this clause reasonable?

In-term vs. post-term restrictions

Almost every franchise non-compete has two parts, and they are treated very differently.

The in-term covenant says you won’t operate or invest in a competing business while you are a franchisee. This is rarely controversial; courts routinely enforce it because you can’t run the brand and a competitor at the same time.

The post-term covenant is the one to study. It restricts you after the franchise ends, and it is defined by three dimensions:

• Duration — how long the restriction lasts after termination (commonly one to three years, though courts weigh whether the period is reasonable).
• Geography — where you can’t compete, often a radius around your former location and sometimes around other units in the system.
• Scope — what counts as a “competing business,” which can be narrow (the same concept) or broad (any related industry).