Franchise agreements often include post-termination non-competition and confidentiality provisions intended to protect the franchisor’s interests even after the franchise relationship has ended. A recent decision of the Court of King’s Bench of New Brunswick in Instant Imprints Canada Inc. v Reed et al. (Instant Imprints)1 serves as a reminder that these post-termination provisions will be enforced where reasonable, and that enforcement can extend beyond agreement signatories. In Instant Imprints, the Court granted broad interlocutory injunctive relief enforcing post-termination non-competition and confidentiality covenants to not only restrain former franchisees, but also non-signatory third parties who knowingly assisted in circumventing the franchisee’s contractual obligations.
Background
In March of 2023, Instant Imprints Canada Inc. (the Plaintiff) entered into a franchise agreement with 738806 NB Inc. and its principals, Robert and Keith Reed (collectively, the Franchisee Defendants), granting them the right to operate a franchise in Moncton, New Brunswick. The franchise agreement imposed certain post-termination obligations onto the Franchisee Defendants, including the non-use or disclosure of confidential information and restrictive covenants on competition within a prescribed territory (effectively spanning the City of Moncton).
By mid‑2025, the Franchisee Defendants had fallen into arrears on payments of royalties and commercial rent required under the franchise agreement. After providing notice and an opportunity to cure, the Plaintiff terminated the franchise agreement in August of 2025. Shortly thereafter, the Franchisee Defendants vacated the premises without notice and removed equipment and materials associated with the Plaintiff’s franchise system.
At the same time, a new company – Elevate Promo & Apparel Inc. (Elevate) – was incorporated by Krista Reed, the spouse of the franchisee’s principal Robert Reed. Elevate operated from the same address as 738806 NB Inc., used the same phone number and online presence, and carried on an identical business within the restricted territory defined in the franchise agreement. Evidence showed that both Robert Reed and Krista Reed assisted each other in operating Elevate, and that Elevate contacted suppliers using knowledge and advantages derived from the Plaintiff’s franchise.
The Plaintiff commenced an action and moved for an interlocutory injunction restraining all defendants, including Elevate and Krista Reed, from competing and from using the Plaintiff’s confidential information pending trial.
The Court’s Decision
The Court ultimately granted an interlocutory injunction restraining the Franchisee Defendants, Elevate and Krista Reed from breaching the post-termination provisions under the franchise agreement. Although Elevate and Krista Reed were not parties to the agreement, the Court drew a strong inference that Elevate was purposefully incorporated as a vehicle to circumvent the Franchise Defendants’ post-termination obligations. In the Court’s own words, the Plaintiff “made a strong case to support the inference” that Elevate and Krista Reed had “acted in coordination in order to achieve and assist the Franchise Defendants to avoid their obligations” under the franchise agreement.2
Applying the leading test for injunctive relief from the Supreme Court of Canada’s decision in RJR-MacDonald Inc. v Canada (Attorney General),3 the Court held that the Plaintiff had demonstrated a strong prima facie case by establishing that the post-termination provisions were unambiguous and likely enforceable. Turning to the second step of the test, the Court accepted that the Plaintiff would suffer irreparable harm absent an injunction because of damage to the integrity of the franchise system, erosion of goodwill, and loss of confidence amongst current and prospective franchisees. Finally, the Court concluded that the balance of convenience favoured the Plaintiff. The Court emphasized that hardship flowing from a deliberate contractual breach cannot outweigh the need to uphold commercial certainty and contractual obligations. “When a party deliberately breaches its contractual obligations,” the Court noted, “equity and justice compels intervention more readily.”4
Key Takeaways
This decision helpfully affirms that courts can enforce reasonable post‑termination restrictive covenants in franchise agreements, even against non‑parties who knowingly participate in or facilitate a franchisee’s breach. Where the evidence shows coordinated conduct designed to evade contractual restrictions, courts can extend injunctive relief to all involved, ensuring that franchisees cannot reap the benefits of the franchise system and then simply re‑emerge under a new name within the restricted territory.
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1 2025 NBKB 261 [Instant Imprints].
2 Instant Imprints at para 98.
3 1994 1 SCR 311 at p 334.
4 Instant Imprints at para 125.