In a recent case decided against AAMCO, a former franchisee and his spouse defeated a non-compete claim. The Florida franchisee had sold his AAMCO franchise after 21 years and opened a new business more than 90 miles from his former franchise location. The non-compete prohibited the franchisee from opening up a competing business within 10 miles of the former franchise location OR within 10 miles of ANY other franchise location. The former franchisee’s new business location was 1.4 miles from another AAMCO franchise location.
The franchisee argued that the non-compete effectively prevented them from opening anywhere on the Florida Gulf Coast. The franchisee had not taken any of their former AAMCO clients with them and there was no evidence the franchisee used the AAMCO name, mark or goodwill in any manner.
The judge agreed with the franchisee and ruled that the non-compete was overly broad and unduly burdensome because the agreement was not narrowly tailored to protect AAMCO’s business interests. The judge modified the non-compete to read that the franchisee could not compete within 10 miles of its former location for a period of two years.
This favorable decision is significant for franchisees. Many Iowa franchisees sign franchise agreements that contain similar non-compete restrictions. The arguments in this case provides some good ammunition for trying to defeat similar franchise non-competes here in Iowa. Iowa judges are permitted to revise non-competes if they believe the restrictions are not reasonable to protect the necessary business interests of the franchise. I could see a similar result happening in Iowa courts under the right circumstances.