Watson v. Waffle House, Inc., 41258
| Decision Date | 07 January 1985 |
| Docket Number | No. 41258,41258 |
| Parties | , 1985-1 Trade Cases P 66,467 WATSON et al. v. WAFFLE HOUSE, INC. |
| Court | Georgia Supreme Court |
Roy N. Cowart, Cowart, Varner & Richards, Warner Robins, for Jim watson et al.
Pettigrew & Trippe, Harry W. Pettigrew, David R. Trippe, for appellants.
George F. Nunn, Jr., Nunn, Geiger & Pierce, Perry, for Waffle House, Inc.
Waffle House and the Watsons entered into an agreement in 1978 for the lease of a Waffle House restaurant to be operated by the Watsons in Warner Robbins, Georgia. The agreement provided that the lease would be for a one-year period and renewable each year. It further provided for a review and joint decision by the parties as to renewal. The lease agreement provided that upon termination of the lease the Watsons could not compete with Waffle House by engaging in the restaurant or fast food business within a five-mile radius for a period of two years.
In 1984 the Watsons opened a new restaurant .4 mile from the Waffle House in Warner Robbins. Waffle House sued to enjoin them from engaging in the restaurant business for two years from January 13, 1984, within a five-mile radius of the Waffle House which they had operated. The trial court granted Waffle House a permanent injunction. The Watsons appeal. We affirm.
1. The Watsons contend that since the lease agreement provided for annual review of the agreement and a joint decision to renew the agreement, mere holding over did not renew all of the terms of the lease. Thus, they reason, the lease expired on March 18, 1979, and the two-year non- -competition period ran March 18, 1981. They base this contention on Citizens Oil Co. v. Head, 201 Ga. 542, 40 S.E.2d 559 (1946), and Ellis v. Brookwood Park Venture, 161 Ga.App. 242, 288 S.E.2d 308 (1982). However, Citizens Oil Co. v. Head deals with a statute of frauds question in a new, as distinguished from renewed, contract or extension of a contract and Ellis v. Brookwood Park Venture concerns dispossessory warrant proceedings brought to evict a tenant. More directly applicable to the situation at hand is Chalkley v. Ward, 119 Ga.App. 227, 166 S.E.2d 748 (1969), in which departure from the notice and renewal provisions of the lease resulted in the lease being renewed without strict adherence. The lease remained the same, only the method of renewal changed. We find that the two-year anti-competition period did not begin to run until January 13, 1984.
2. The Watsons next contend that the anti-competition clause is too broad to be enforceable because it restricts them from engaging in the restaurant or fast food business in any capacity. A different standard is applied in determining the validity of covenants contained in employment contracts and those which are a part of a contract to sell a business. When a portion of a covenant not to compete which is a part of a sale of a business interest is found to be unreasonable, the court has tended nevertheless to uphold the remaining portions of the covenant by "blue penciling" or severing the overly broad restrictions. On the other hand, the court has found covenants not to compete which are part of a contract of employment to be nonseverable and has held that overbreadth of one portion of the covenant so taints the entire covenant as to make it unenforceable.
The transaction before the court in this case fits neither of these circumstances. Here we have a lease of building premises tied to what amounts to a franchise agreement under which the business must be operated according to certain conditions and limitations imposed by the lessor/franchisor. The question then is whether a transaction of this sort is analogous to an employment contract or to a contract for the sale of a business interest. The rationale behind the distinction in analyzing covenants not to compete is that a contract of employment inherently involves parties of unequal bargaining power to the extent that the result is often a contract of adhesion. On the other hand, a contract for the sale of a business interest is far more likely to be one entered into by parties on equal footing. White v. Fletcher/Mayo/Associates, Inc., 251 Ga. 203, 303 S.E.2d 746 (1983).
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