What is the geographic scope of the 7 Brew covenant not to compete in relation to other 7 Brew stores?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
ious, current, and prospective customers to inform them that a 7 BREW Store no longer will operate at the Store's location. We also have the right to inform them of other nearby 7 BREW Stores. Exercising these rights will not constitute interference with your contractual or business relationships with those customers.
E. Covenant Not to Compete
Upon our termination of this Agreement in compliance with its terms, your termination of this Agreement without cause, or expiration of this Agreement (without the grant of a successor franchise), you and your owners agree that neither you, they, nor any member of your or their Immediate Families will:
- (1) have any direct or indirect, controlling or non-controlling interest as an owner whether of record, beneficial, or otherwise—in any Competitive Business located or operating:
- a. at the Store's site; or
- b. within three (3) miles of the former Store site; or
- c. within three (3) miles of the physical location of another 7 BREW Store in operation or under construction on the later of the effective date of termination or expiration or the date on which the restricted person begins to comply with this Section 19.E,
provided that this restriction does not prohibit ownership of shares of a class of securities publicly-traded on a United States stock exchange and representing less than three percent (3%) of the number of shares of that class of securities issued and outstanding;
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to the 2025 FDD, the covenant not to compete for 7 Brew includes restrictions based on proximity to other 7 Brew locations. Specifically, if the Franchise Agreement is terminated by 7 Brew, or by the franchisee without cause, or upon expiration without a successor franchise being granted, the franchisee and their owners are restricted from having any ownership interest in a Competitive Business within three miles of the physical location of another operating or under-construction 7 Brew store. This restriction is effective from the date of termination or expiration, or the date the restricted person begins to comply with the covenant.
This non-compete clause prevents former franchisees from opening a competing business too close to an existing 7 Brew, protecting the brand's market share and customer base. The three-mile radius extends to locations under construction, preventing franchisees from anticipating future 7 Brew locations and preemptively establishing a competing business nearby.
However, the restriction does not prevent ownership of less than three percent of shares in a publicly-traded company, allowing for minor investments in competing businesses without violating the covenant. The term "Competitive Business" is defined as any business deriving more than 25% of its revenue from selling coffee, or businesses that franchise or license others to operate such businesses, excluding 7 Brew stores operating under a franchise agreement with them. This definition clarifies the types of businesses the franchisee is restricted from being involved with.
Prospective franchisees should carefully consider the implications of this non-compete agreement, especially if they plan to remain in the same geographic area after the franchise agreement ends. Understanding the scope and limitations of the covenant is crucial for future business planning.