The Franchise Memorandum

The Tenth Circuit Court of Appeals recently upheld a preliminary injunction awarded to fitness chain franchisor Core Progression, enforcing a post-termination noncompete against a former franchisee in North Carolina. Core Progression Franchise LLC v. O’Hare, 2022 WL 1741836 (10th Cir. May 31, 2022). The district court had enjoined the franchisee from operating a competing business from the site of its former franchise, albeit under a new name. The franchisee appealed.

In upholding the preliminary injunction, the Tenth Circuit concluded that Core Progression had a substantial likelihood of succeeding on the merits because the record illustrated that the franchise agreement’s noncompete was enforceable and had plainly been breached. The court also found that Core Progression would suffer irreparable harm absent an injunction because the former franchisee’s use of Core Progression’s training system and marketing, and perceived affiliation with Core Progression, was likely to cause customer confusion and damage to the brand. In addition, the former franchisee’s competition threatened Core Progression’s efforts to expand into North Carolina. The court also concluded that the franchisee’s self-inflicted harm did not outweigh the potential harm to Core Progression from a loss of its trade secrets and other damage to its brand. To conclude its analysis, the court noted that Colorado law expressly mandates that enforceable noncompete agreements further the public interest in this context.

*Andrew Biddison is a Summer Associate for Lathrop GPM who contributed to the writing of this post.