Is there anything a 7 Brew franchisee is prohibited from doing with ure Franchise, LLC?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
- (1) have any direct or indirect, controlling or non-controlling interest as an owner whether of record, beneficial, or otherwise—in a Competitive Business (defined below), wherever located or operating, provided that this restriction will 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;
- (2) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, wherever located or operating;
- (3) directly or indirectly loan any money or other thing of value, or guarantee any other person's loan, to any Competitive Business or any owner, director, officer, manager, or employee of any Competitive Business, wherever located or operating;
- (4) divert or attempt to divert any actual or potential business or customer of the Store to a Competitive Business; or
- (5) solicit other franchisees, or use available lists of franchisees, for any commercial purpose other than purposes directly related to the Store's operation.
The term "Competitive Business," as used in this Agreement, means any (a) business that derives more than twenty-five percent (25%) of its revenue from selling coffee, or (b) business granting franchises or licenses to others to operate the type of business described in clause (a), other than a 7 BREW Store operated under a franchise agreement with us.
Source: Item 22 — CONTRACTS (FDD pages 82–83)
What This Means (2025 FDD)
According to the 2025 FDD, a 7 Brew franchisee faces several restrictions regarding competitive business activities. Specifically, franchisees are prohibited from having any direct or indirect ownership interest in a Competitive Business, defined as any business deriving more than 25% of its revenue from selling coffee or franchising such businesses, excluding other franchised 7 Brew stores. This restriction does not prevent franchisees from owning less than 3% of a publicly-traded class of securities on a U.S. stock exchange.
Additionally, 7 Brew franchisees are not allowed to work for a Competitive Business as a director, officer, manager, employee, consultant, representative, or agent. They are also barred from providing loans or guarantees to any Competitive Business or its personnel. Franchisees cannot divert or attempt to divert business or customers from their 7 Brew store to a Competitive Business, nor can they solicit other franchisees for commercial purposes unrelated to their store's operation.
These restrictions are designed to protect 7 Brew's market position and prevent franchisees from using their knowledge and resources gained from the franchise to benefit competing businesses. Prospective franchisees should carefully consider these limitations, as they significantly restrict their ability to engage in other coffee-related ventures during the term of their franchise agreement. It is common for franchise agreements to include non-compete clauses, but the specific scope and duration can vary significantly, so understanding these terms is crucial for any potential franchisee.