Background
F45 Training Canada Limited franchises group fitness studios specializing in High Intensity Interval Training. In March 2019, it entered a five-year franchise agreement with 2685802 Ontario Limited for a Whitby, Ontario studio. Christopher Skeates and Whitney Skeates, the corporation’s sole directors, signed as “key persons” and guarantors. The studio opened as F45 Whitby West in November 2019.
In October 2024, the respondents said they would not renew the agreement when it expired that November. They signed a franchise agreement with The Yard Gym (“TYG”), extended their mall lease, and contacted studio customers about rebranding and exchanging F45 memberships for TYG memberships. A funding request said they anticipated that 98% of the studio’s 300 members would remain through the transition.
F45 applied to the Superior Court of Justice for a permanent injunction enforcing clause 20’s two-year post-term non-competition and non-solicitation covenants. Justice Myrna L. Lack dismissed the application on March 14, 2025, with written reasons released June 13, 2025 and reported at 2025 ONSC 7357. She found both covenants ambiguous regarding restricted activities and therefore unenforceable, without assessing their reasonableness. F45 appealed.
The Court’s Holding
Justice Katherine van Rensburg, with Justices Bradley Miller and Steve A. Coroza agreeing, stated that she would allow the appeal in the terms indicated. The court rejected F45’s argument that the application judge had imported an employment-law presumption of unenforceability. Her statement reflected the general restraint-of-trade principle that restrictive covenants are presumptively invalid unless reasonable. The court did not decide whether franchise covenants warrant employment-style heightened scrutiny because its result did not turn on that question.
The court nevertheless identified an extricable legal error in the application judge’s interpretive approach: she assessed the wording in a decontextualized manner without first interpreting the covenants in the agreement as a whole and the surrounding circumstances. Applying those principles to these clauses, the court found no unresolved ambiguity. The non-competition clause’s enumerated activities, “including but not limited to” language, and reference to an amendable Operations Manual did not establish ambiguity. The non-solicitation clause, read with provisions reserving F45’s ownership of goodwill and past and present member information, protected customer information obtained during the franchise and guarded against indirect circumvention.
The covenants received different outcomes on reasonableness. The non-competition clause was unenforceable because its prohibited activities extended beyond what was reasonably necessary to protect F45’s confidential information, customer relationships, goodwill, and full-fitness-system business model. The non-solicitation clause was reasonable and enforceable because it was limited to protecting those legitimate proprietary interests. The respondents’ communications encouraging F45 members to join TYG, with inducements, breached that clause. But the record could not establish the full extent of breaches during the clause’s term, ending in November 2026, or F45’s resulting loss. The court remitted the extent of breach and appropriate remedy to the Superior Court for determination by trial of an issue, reference, or as directed. Absent agreement on costs, the parties were directed to file costs outlines and written submissions of no more than five pages within 20 days.
Key Takeaways
- The alleged employment-law presumption ground failed: the application judge had stated the general restraint-of-trade principle, and the court left the appropriate level of franchise-covenant scrutiny unresolved.
- The interpretive error was case-specific: these covenants had to be construed in the whole agreement and surrounding circumstances before any unresolved ambiguity could invalidate them.
- Clarity did not make both covenants enforceable. This non-competition clause was excessively broad in prohibited activities, while this non-solicitation clause reasonably protected F45’s proprietary interests.
- The court established breach of the non-solicitation clause but remitted its extent and remedy because the record was insufficient; it did not grant the requested final relief.
Why It Matters
The decision illustrates why franchisors and franchisees must separate contractual meaning from reasonableness. Here, contextual interpretation removed ambiguity as a basis for invalidity, but the activity restrictions still determined enforceability. F45’s ownership of goodwill and member information supported targeted non-solicitation protection, not the broader competitive ban.
The disposition also limits what was finally resolved. The appeal was allowed in the stated terms, with enforceability and breach of the non-solicitation clause established, while the extent of breach, loss, and remedy remain for the Superior Court.