Does the 7 Brew covenant not to compete apply after a permitted transfer of the franchise?

According to 7 Brew's 2025 Franchise Disclosure Document, the covenant not to compete does apply after a permitted transfer of the franchise under Section 16. This means that even if a franchisee sells or transfers their 7 Brew franchise to another party with 7 Brew's permission, the original franchisee and their owners are still bound by the non-compete restrictions.

The non-compete agreement states that for two years after termination or expiration of the franchise agreement, the franchisee, their owners, and their immediate families cannot have an interest in, perform services for, loan money to, divert business from, or solicit other franchisees for a Competitive Business. A Competitive Business is defined as any business deriving more than 25% of its revenue from selling coffee or granting franchises/licenses to others to operate such a business (excluding other 7 Brew locations).

The restrictions apply to businesses located at the former 7 Brew store site or within three miles of it, or within three miles of any other 7 Brew store. The two-year period begins when the agreement terminates or expires, but it is paused if the restricted person breaches the agreement and resumes when compliance restarts. The period is also paused during any legal proceedings related to enforcing the restrictions. This ensures that the competitive restrictions remain effective even if there are delays or disputes.

This provision protects 7 Brew's interests by preventing former franchisees from using their knowledge and experience gained from operating a 7 Brew store to compete against the franchise system, even after they have transferred their franchise to someone else. Prospective franchisees should carefully consider these restrictions and how they might impact their future business opportunities before entering into a franchise agreement with 7 Brew.