Post-termination non-compete clauses in franchise agreements
Where the clause is summarized, what the FTC says it typically looks like, why the FTC's 2024 non-compete rule does not change it, and two court examples.
A post-termination non-compete is a contract clause that limits the former franchisee from running a competing business after the franchise ends. Whether it can be enforced, and how far, depends on the clause and on state law. Your own agreement controls, and a lawyer licensed in your state can advise.
Where the clause is disclosed
Item 17 of the franchisor's disclosure document has a row titled "Non-competition covenants after the franchise is terminated or expires." The FTC's consumer guide describes such restrictions as typically stopping a former franchisee from operating a competing business within a specified distance, and says they may last as long as three years. That is the FTC's general description. Your agreement may say something different. See Item 17 of the FDD.
The FTC non-compete rule does not apply
In 2024 the FTC issued a rule on non-compete clauses. The FTC's own page now says "The Noncompete Rule is not in effect and it is not enforceable." A district court order stopped enforcement on August 20, 2024. On September 5, 2025 the FTC voted to dismiss its appeals and accede to the vacatur, and a final rule published on February 12, 2026 removed the Non-Compete Rule from the Code of Federal Regulations. The FTC's page also describes the rule's definition of "worker" as not including a franchisee in the franchisee-franchisor relationship (that wording was read through a summarizing tool, so check the page). Either way, a post-termination covenant in a franchise agreement is a matter of the contract and state law.
Two court examples, both specific to their state
A law firm's published summary of a 2024 New Jersey federal decision, GPI, LLC v. Patriot Goose Control Inc., says the court found a two-year, 150-mile covenant geographically "overly broad" under New Jersey law, and limited it to an injunction within 50 miles of the former territory for two years. This comes from the firm's own description, not the opinion.
Nebraska's franchise statute, read from an archived copy (check the official text), says that if restrictions in a noncompete agreement are found by an arbitrator or a court to be unreasonable, the arbitrator or court shall reform the terms. Under that wording, an unreasonable covenant is reformed and enforced and not struck.
These two examples show that results differ by state. They are not predictions. This site found no neutral source stating a national rule on how courts treat former franchisee covenants.
Connected topics
A non-compete is one of several post-termination obligations, and the Item 17 table lists the franchisee's obligations on termination or non-renewal in a separate row. Read both together. See using the brand after termination, preliminary injunction and TRO in franchise disputes, and can a franchisor terminate my franchise.
Where this came from
- 16 CFR 436.5(q), Item 17 (checked 28 October 2026).
- FTC, A Consumer's Guide to Buying a Franchise (checked 28 October 2026).
- FTC, Noncompete Rule page (checked 28 October 2026).
- FTC press release, September 2025 (checked 28 October 2026).
- Federal Register, 91 FR 6507, 12 February 2026 (checked 28 October 2026).
- Lathrop GPM summary of GPI, LLC v. Patriot Goose Control Inc. (checked 28 October 2026).
- Neb. Rev. Stat. 87-406 and 87-404(2), archived copy (checked 28 October 2026).