After termination or expiration of a 7 Brew franchise agreement, what is the geographic restriction preventing a franchisee from having an interest in a competitive business near another 7 Brew store?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
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; or
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, upon termination or expiration of the franchise agreement, a franchisee and their owners are restricted from having a direct or indirect interest in a Competitive Business. This restriction applies if the termination is initiated by 7 Brew in compliance with the agreement, or by the franchisee without cause, or upon the agreement's expiration without a successor franchise being granted.
The geographic scope of this restriction includes (a) the store's site, (b) within three miles of the former store site, or (c) within three miles of another operating or under-construction 7 Brew store. The restriction is effective from the termination or expiration date, or the date the restricted person begins to comply with this section, whichever is later.
However, there is an exception: the restriction does not prevent ownership of less than three percent of a class of securities publicly traded on a U.S. stock exchange. A "Competitive Business" is defined as any business deriving more than 25% of its revenue from selling coffee, or any business that franchises or licenses others to operate such a business, excluding a 7 Brew store operated under a franchise agreement with 7 Brew. This non-compete clause aims to protect 7 Brew's market and brand integrity by preventing former franchisees from directly competing in close proximity to existing 7 Brew locations.