How do franchisors protect themselves from competition from franchisees who leave their systems?
In general, there are two different ways that franchisors protect their goodwill at the franchised location after its franchisees leave its systems. First, some franchisors have legal control of the franchised location, either as owners or primary tenants of the premises. Second, almost all franchise agreements include “post-term covenants not to compete.” This precludes the franchisee from operating a similar business at the location where he previously operated the franchise.
