Legal Question in Business Law in California

Actually most covenants to not compete are unenforceable in California.

Covenants not to compete are, however, enforceable when given in connection with the sale of a business that includes the goodwill of the business. This is specifically provided for in Business and Professions Code section 16601. Most businesses that have been established for a while and have a decent reputation would have recognizable goodwill, which would pass along with the nuts and bolts assets. I would say, depending upon the size, age, reputation etc. of the business sold, the duration could be in the two to five year range, maybe a little longer if it is a time-payment rather than all-cash sale, and distance could be the area covered well by the local yellow pages, or the county, or 25 mile radius, or something of this kind.

As a Franchise Attorney I agree with the second attorney answer and only add the following. In terms of time, if payment for the business is via a promissory note, length should be the length of the promissory note plus a reasonable extra time - probably no more than a year. If it's an all cash deal, then, as a rule of thumb, the time should be no more than a year. Consult with a good business or franchise attorney in your area for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

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