Atlanta Bread Ruling Explained In Franchise Times

Cochran & Edwards recently settled a case against the Atlanta Bread Company on behalf of its client Sean Lupton-Smith. The case has been closely followed by Janet Sparks of Franchise Times®. The case, which went all the way to the Georgia Supreme Court, provides both franchisors and franchisees with a legal ruling confirming two key points of franchise law. First, that a restrictive covenant, such as non-compete clause, must be reasonable and meet specific, well-established standards. And second, the presence of one void non-competition covenant in an agreement voids all other non-competition covenants in the same agreement. This second point is very important because it prevents franchisors from loading up their agreements with truly ominous covenants, which they enforce by threats and intimidation, even though they cannot legally enforce them. The penalty for this, and the only way to stop it from becoming even more prevalent, is to void all the non-compete provisions in an agreement containing one or more that are unlawful. The Franchise Times story can be read in the January 2010 issue.