Singas operates or franchises approximately 24 Singas Famous Pizza restaurants across three states. New York Advertising LLC operated a former Singas Famous Pizza franchise in New York City while also operating a business that was very similar, called New York Famous Pizza. New York Famous Pizza is located in Queens.
To defend itself in the lawsuit, New York Advertising claimed that the post-termination non-compete covenant in the franchise agreement was unreasonably broad because the New York Famous Pizza restaurant existed ten miles away, and pizza restaurants are inherently local. Fortunately for Singas, the court disagreed. In its decision, the court pointed to the following:
- There are nine other Singas Famous Pizza Restaurants within 10 miles of New York Famous Pizza.
- The flagship Singas Famous Pizza restaurant is less than 1 mile away from New York Famous Pizza.
- There is significant danger posed to Singas’s institutional knowledge, reputation, and goodwill by New York Advertising continuing to operate New York Famous Pizza.
- Singas uses a distinctive system and is a well-recognized brand.
- New York Famous Pizza used a menu that was virtually identical to Singas Famous Pizza, adopted other distinctive practices used by Singas, employed former Singas employees, and used custom-made equipment taken from its Singas franchise restaurant.
Clearly, New York courts will uphold the reasonableness of non-compete agreements in some circumstances. As a result, it is essential that you contact a New York non-compete attorney for guidance before taking action that could potentially violate such an agreement.
To learn more about non-compete agreements, contact a New York non-compete agreement lawyer at (888) 497-3410.