Franchise Non-Compete Clauses: What's Enforceable

A franchise non-compete clause is enforceable only to the extent your state’s law allows, and almost every state that allows them, judges them on the same test: a legitimate business interest to protect, plus reasonable scope, duration, and geography. There is no nationwide federal rule banning or blessing them. The franchisor’s drafting goal and the franchisee’s review goal are the same fact pattern read from opposite sides: is this restriction narrow enough that a court in this state would enforce it?

This explains the legal framework, what “reasonable” tends to mean in practice, and why the answer depends so heavily on where you operate.

There Is No Federal Non-Compete Ban

It is worth clearing up the federal picture first, because it generated headlines that no longer reflect the law. The FTC issued a rule in 2024 that would have banned most non-competes nationwide. A federal court set that rule aside in 2024, the FTC withdrew its appeal in 2025, and the rule never took effect. As a result, there is no nationwide federal non-compete rule, and franchise non-competes are governed where they have always been governed: by state law. Treat any claim that “non-competes are now banned” with caution — it is not the law.

The Reasonableness Test

In states that enforce non-competes, courts apply a reasonableness analysis. A franchise post-term non-compete generally has to satisfy four elements, and a clause that overreaches on any one of them risks being narrowed or struck:

• Legitimate business interest — the clause must protect something real, such as trade secrets, confidential systems, or customer relationships, not merely shield the franchisor from ordinary competition.
• Reasonable geographic scope — tied to the area the franchise actually served, not an arbitrary wide radius.
• Reasonable duration — long enough to protect the interest, no longer; shorter post-term periods are easier to defend than multi-year ones.
• Reasonable activity definition — a precise description of the competing activity barred, rather than a sweeping ban on an entire industry.

The narrower and more specific the clause, the more likely a court is to enforce it as written.

State Law Is the Whole Ballgame

Enforceability varies dramatically by state, and this is where general guidance stops being useful and individual legal advice begins. Some states are highly skeptical of non-competes and will not enforce many of them; others enforce reasonable restrictions routinely; and several have enacted statutes that change the analysis. Because a clause that is enforceable in one state may be void in another — and because the rules continue to change through legislation and court decisions — the only reliable answer is one keyed to the specific state of operation at the time the question arises. Do not rely on what a clause says, or on how it was treated in a different state, without checking current law where the franchise operates.

NASAA’s Guidance for Franchisors

In January 2025, the North American Securities Administrators Association (NASAA) — the body whose franchise project group informs how state examiners review franchise filings — issued guidance recommending that post-term non-competes in franchise agreements be reasonable. Its recommendations track the reasonableness test: restrict only genuinely competitive activity, limit duration to what is necessary to protect the franchisor’s interest, and keep geographic limits as narrow as possible. The guidance is not itself law, but state franchise examiners often follow NASAA’s direction, so franchisors drafting or renewing agreements should expect narrowly drawn restrictions to face less friction than broad ones.

Drafting and Reviewing: The Same Checklist

Whether you are writing the clause or signing it, the questions are identical:

A clause that a court is likely to enforce is usually one that both sides would call fair on its face. Overbroad clauses help no one: they invite challenge and can be struck or rewritten by a court.

Frequently Asked Questions

Are franchise non-compete clauses enforceable?

It depends entirely on your state and on whether the clause is reasonable in interest, scope, duration, and geography. Some states enforce reasonable franchise non-competes; others are highly restrictive. There is no single national answer.

Did the FTC ban non-competes?

No. The FTC’s 2024 rule was set aside by a federal court, and the agency dropped its appeal in 2025. The rule never took effect, so non-competes — including franchise non-competes — remain governed by state law.

How long can a franchise non-compete last?

There is no fixed number; courts ask whether the duration is reasonable for the interest being protected. Shorter post-term periods are generally easier to enforce than long ones, but the answer turns on state law and the specific facts.

What should I do about a non-compete in my franchise agreement?

Have it reviewed against the law of the state where you operate before you sign or before you act on it after leaving. Enforceability is state-specific and fact-specific, which is exactly the kind of question to put to a franchise attorney.

Questions about a franchise non-compete? Reidel Law Firm advises franchisors and franchisees on whether a post-term non-compete is reasonable and enforceable in your state — before it becomes a dispute. Talk to a franchise attorney →