That last point is a good one: the “covenant not to compete.” I don’t know what the subway franchise agreement says, as you do Tigerman, but most franchise agreements should contain a provision forbidding the franchisee from offering similar goods or services within the same territory for a reasonable period of time. As you know, Tigerman, such a clause will be ruled invalid if the duration or prohibited territory are too large (ie. prohibiting sale of sandwiches anywhere in the world forever thereafter), but it could definitely prohibit the franchisee from selling sandwiches in Taipei for 2 or 3 years following termination of the franchise agreement.
Such clauses are commonplace and are reasonable. If Subway shares their expertise training you to make and sell sandwiches their way, you shouldn’t have a right to then quit and take advantage of their know-how. If you don’t like that provision then you shouldn’t enter an agreement with them but should just try to do it on your own from the beginning without them.
Sorry Mucha Man, but I think it’s fair, too, if you’re talking about the company claiming ownership to materials that you developed on the job. After all, they paid for you to sit at your desk devising such materials. Nor is it unusual for an employer to claim ownership of such materials; in fact I believe that’s the norm. If that’s what you’re talking about, I understand your resentment, but if that’s the pre-arranged deal upon accepting the job, then that’s the deal. In fact, that is often an extremely important issue that should be negotiated prior to entering into an employment agreement. If you’re talking about material you devised off the job, on your own time, that would be another matter; that would be very wrong.
In any event, getting back to topic, as Alien wisely pointed out, in Taiwan the prevailing legal principle is “contract shmontract.” That’s why these subbers are able to get away with their obvious violation of legal rights – because laws aren’t generally enforced in Taiwan.
I am curious: if I legally break the franchise but continue to work in the same business under my own brand with my own products and you call this unfair and want to restrict me from doing so (temporarily) - where do you see a difference (if you see one) to an employee of a big company that trained him to gain a special expertise, assuming that employee resigned and starts to work for a competitor or starts his own business in the same area? I.e. would you also want to impose a temporary ban on him/her?
As MT indicated above, it is common for companies to include “non-compete” clauses in their employment contracts. Also, as MT noted, so long as these clauses are reasonable in terms of geographic and temporal restriction, they are usually held valid by courts, even in Taiwan.
Moreover, if the employee had access to the first employer company"s trade secrets, he can, in theory, be precluded from using the same even after his non-compete restriction period has elapsed, and also be precluded from using the same in any other geographic area (provided the trade secrets remain secret and do not enter the public domain through any act of his).
Rascal, what I was referring to – a covenant not to compete – is an express contractual provision that the employer and employee, or franchisor and franchisee, both agree to when entering into their relationship with eachother. When entering into such a relationship one should carefully review the contract terms and if it contains such a provision, or any other provision, that you find objectionable, then you should object to it before entering into the relationship and ask that the provision be eliminated or modified, or perhaps you might want to just draw a line through it and mark your initials next to it when signing. They may object to you doing that, or they may not, but if it’s important to you then you should deal with it before entering into the contract.
If you don’t do that, and you enter into a written, contractual relationship and that’s one of the terms of the agreement, why should you have a right to object later? If you didn’t like the terms that were offered to you you didn’t have to accept.
I think some contracts have it written that you can’t work for a competitor within 6 months of leaving, or even in the same field. But the contract will have to offer something special in return for me to sign it. I have had contracts that say I can’t work for someone we do buisness with (suppliers etc) or I can’t employ anyone from the company (ie. leave and take others with me)
This is great; lots of highly informed opinions. Cheers tigerman and MT for the finer points.
I’m still a little worried that, because I worked at McD’s in high school, the burger police are going to come after me the next time they smell beef on the barbecue.
I’ve read all the posts, had my coffee, and I still seem to be missing something Subway is a big-name franchise, and presumably does have these non-compete agreement thingies in place. Then how can these Subber places legally come to exist in the first place? Are they actually different enough not to ‘count’ under the agreement? Or have they managed to get around it some other way? Or are they going to get their asses sued?
Ok, I understand what you are saying about the clauses; what can actually happen if I break such an agreement, say I start working after 3 months for a competitor even I would have to wait for 6 months (assuming this would go to court and it decides in favour of the former employer)? Does such a contract (clause) regulate penalties?
Understand that you should read carefully and object before signing up, but it can’t be right to stop me a lifetime from working / setting up a business in that area!?
Hence my question under the condition that the contract was legally terminated.
Does Subway actually have such a non-compete clause? Isn’t clear to me from the previous posts …
Read the link Tigerman posted; interesting material, though I don’t know how enthusiastic I’d be about signing on the dotted line. Some of it is pretty harsh!
To quote:
“After expiration or termination of this agreement, [employee name] agrees not to compete with [company name] for a period of [number] years within a [number] mile radius of [company name and location]. This prohibition will not apply if this agreement is terminated because [company] violated the terms of this agreement. Competition means owning or working for a business of the following type: [specify type of business employee may not engage in]”
Sounds like an employee would pretty much have to choose a new career if they ever wanted to leave a contract with such a clause.
First, keep in mind that legal advice is generally worth what you pay for it. If you want some good advice, send me a pm and I’ll provide you with a copy of my standard retainer agreement.
Second, I don’t know all the facts in this case. I’m not sure that I’ve seen these Subbers and I know I’ve never seen whatever agreements their operators may have had with Subway. Given that, you ask “how can these Subber places legally come to exist in the first place?” I’m not sure that they can. If their owners previously signed agreements stating that they would not open sandwich shops in a certain territory within a certain period of time (and I agree with you that one would expect Subway to require that of franchisees) and they then went and did that, then they are apparently illegal. I wouldn’t be surprised if that’s the case – look at all the people selling counterfeit goods in Taiwan in blatant violation of the law. And, if that is the case, I hope they do get their asses sued.
But, as I said, I don’t know the facts. Maybe their franchise agreements foolishly didn’t include non-compete clauses. Maybe the agreements are invalid for some reason. Maybe they are not owned or run by the former franchisees. Maybe. .
Aside from the non-compete clause issue, though, there are other legal issues as Tigerman pointed out. For example, is it a case of trademark infringement? Is “Subbers” confusingly similar with “Subway” such that consumers might be misled as to whether they are the same? There seems to be a strong case for the that, especially if the lettering and colors of the sign, and other decorations, are similar. Even if they have a legal right to open sandwich shops, they could still face potential liability for trademark infringement if Subway chose to sue them.
It might or might not. Any contract can include a “liquidated damages” provision that spells out the exact amount of penalty for a violation. It could say, for example, that in the event the franchisee opens a competing store in violation of this agreement, the franchisee shall be liable for X dollars per day that such business is open for business (or however one decides to structure the fixed damages in advance). Liquidated damage provisions are not always legal. For example, such a provision that provided for damages of US$ 1 million per day in the event of breach, would almost surely be ruled invalid by the court, even if both parties agreed to it in advance. But assuming the amount of liquidated damages is reasonably close to what the actual damages caused by breach might be, then they are often upheld.
Absent such a clause it may be hard to calculate damages for breach of a non-compete clause (that’s why liquidated damage clauses are used). Damages might be based on amount of profits by Subbers, amount of loss by Subway (don’t ask me how they would figure that out), or maybe some other method.
No. You can go into a different line of work. But if you want to open the same kind of business you would have to do it in a different location or after the time expired. Courts require that the restricted location and duration of prohibition must be “reasonable.” So, if you terminate your Subway franchise in Taipei, you can go open a sandwich shop in your home country (or maybe even in Kaohsiung – one often can’t say for sure until a judge rules on the matter). But it wouldn’t be fair for you to tear down your Subway sign and put up a Subbers sign at the same location. You will presumably draw customers based on the reputation and goodwill of Subway, which were benefits that you paid for in your franchise agreement.
And, no one forced you to sign the franchise agreement. People sign those agreements for benefits such as reputation, name recognition, equipment, training, etc., which will hopefully result in greater profits than if they simply opened “Joe Shmoe’s Sandwich Shop.” The price that you pay for those benefits includes franchise fees, requirement to comply with their rules concerning decor and procedures, and often a non-compete clause. If you feel the benefits are worth the cost, sign the contract. If you don’t think so, then open “Joe Schmoe’s” instead and do it your way.
Now why would I bother paying you for information when I don’t own or run a Subber? But when I decide to open that “McRonald’s” I’ll let you know But you’ve basically confirmed what I thought about the seemingly shaky legal nature of these Subbers…
The local business culture is such that employees are always leaving and setting up their own shop when they feel they are ready or recieved enough training from their current company. In the company I worked at before, there were 6 different employees who left said company and started competing businesses which formed 4 new companies. The position I filled in the company was to take the place of a departing employee who was now a competitor and my first task was to talk to foreign customers and try to discredit the former employees new operation. (Bosses orders)
I remember when one german guy was LEAVING the company, the president tried to ask him to sign a non-compete contract. Better late than never!!! The german guy laughed at that and left the company. That same evening, his car was broken into and his computer was stolen along with some files from his breifcase.
Alot of the bosses of companies here tell me that they purposely hire “dumb” employees because they dont want someone who is too sharp and would be a threat to the company. They also like to hire women as purchasers as they regard women as being more honest than men. Now the commissions that the purchasers take here is another good story.
Heard a little about this through an acquaintance that is setting up his own factory here. Seems there’s quite a bit of “Hong Bau” handed out to purchasers who go with certain suppliers. That’s why the purchasers are all driving new BMW 7 series coupes.
Subway is a big-name franchise, and presumably does have these non-compete agreement thingies in place. Then how can these Subber places legally come to exist in the first place? Are they actually different enough not to ‘count’ under the agreement? Or have they managed to get around it some other way? Or are they going to get their asses sued? 
