On a new episode of She Talks Law, I had the pleasure of speaking with Nixon Peabody partner and co-leader of the firm’s Franchising & Distribution Team, Keri McWilliams, and WellBiz Brands Chief Legal Officer, Sherin Sakr. WellBiz Brands is a leading health and wellness company in the United States, and oversees franchise brands including Amazing Lash Studio, Elements Massage, and, one of my personal favorites, Drybar.
In my conversation with Keri and Sherin, we dive into the Federal Trade Commission’s (FTC) ban on non-compete agreements and highlight the implications for the franchise industry.
Although non-compete agreements between franchisors and franchisees are excluded from the FTC’s Non-Compete Rule, and there are several legal challenges to the ban that already have been filed, the complexity of franchise relationships requires careful consideration of this new rule. Keri offers alternatives for navigating franchise and employment relationships in the franchise industry with an eye toward protection of proprietary information and ensuring contractual safeguards in the absence of non-competes.
Keri explains that franchisors have historically relied on non-competes and other contracts like non-solicitation provisions and confidentiality covenants to protect proprietary information and safeguard their brand’s goodwill. She says it is important for franchisors to revisit their existing franchise agreements, operations manuals, and recommendations to franchisees to ensure there are no inconsistencies with the current law and that their proprietary information is still protected.
“Anybody who was protecting anything related to their business with a non-compete needs to identify those things they’re trying to protect, and make sure they’ve reviewed their contracts, their operations, and their legal protection to make sure that they have other protections in place if this non-compete ban turns out to be enforceable in the long run.” —Keri McWilliams
According to Sherin, there are many things franchisors and franchisees can do to safeguard their business interests and proprietary information in the absence of a non-compete agreement. She highlighted the importance of identifying and protecting trade secrets, using contractual tools such as non-disclosure and non-solicitation agreements, and enforcing trademark and trade dress rights.
Sherin also noted the importance of franchisees and franchisors being aware of existing state regulations related to non-competes.
“Even if this falls through, you may still have obligations locally that you need to abide by.” — Sherin Sakr
This is an evolving issue, and I want to thank Keri and Sherin for joining us to share their timely insights on this episode of She Talks Law.