After the Afuri Ramen Dumpling franchise is terminated or expires, what is the geographic scope of the non-competition covenant?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in Franchise Agreement ("FA") | Summary |
|---|---|---|
| transfer any interest in you or in | ||
| your Franchise. We will elect to | ||
| exercise our option to purchase | ||
| within 30 | ||
| business days after | ||
| our receipt of your written | ||
| notification | ||
| and required | ||
| information. If we offer you an | ||
| amount that you do not agree to, | ||
| you may try to sell to a third | ||
| party. You are obligated before | ||
| any transfer to a third party to | ||
| comply with all criteria outlined | ||
| in the paragraphs related to | ||
| Right of First Refusal. | ||
| p. Death or Disability of franchisee | FA Section 7.2 | Within 180 days, your heirs, beneficiaries, devisees or legal representatives may apply to continue to operate the franchise, or transfer Franchise interest. |
| q. Non-Competition Covenants During the Term of the Franchise | FA Sections 5.8 & 5.9 | You may not disclose confidential information or compete. Certain exceptions may apply if you operate one or more existing restaurants that offer similar food items as provided in the Pre-Existing Business Addendum to the Franchise Agreement (Exhibit 4). |
| r. Non-Competition Covenants After the Franchise is Terminated or Expires | FA Sections 5.9 & 6.8 | No competition is allowed for two years within the Territory, within a 50-mile radius of the Territory, and within a 50-mile radius of any location where we operate or have granted the franchise to operate an Afuri business. Certain exceptions may apply if you operate one or more existing restaurants that offer similar food items as provided in the Pre-Existing Business Addendum to the |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 40–45)
What This Means (2024 FDD)
According to Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, if the franchise is terminated or expires, the franchisee is subject to a non-competition covenant. This covenant restricts the franchisee from engaging in competitive activities for a period of two years. The geographic scope of this restriction includes the franchisee's Territory, a 50-mile radius around the Territory, and a 50-mile radius around any location where Afuri Ramen Dumpling operates or has granted a franchise.
This means that after the franchise agreement ends, the former franchisee cannot open a similar restaurant or business within these defined areas. The purpose of this non-competition agreement is to protect Afuri Ramen Dumpling's market share, trade secrets, and customer relationships. The franchisor aims to prevent former franchisees from using the knowledge and experience gained during their time with Afuri Ramen Dumpling to directly compete against the franchise system.
For a prospective franchisee, this non-competition clause is a significant consideration. It limits their ability to start a similar business in specific locations for two years after leaving the Afuri Ramen Dumpling system. Franchisees should carefully evaluate these restrictions and their potential impact on their future business plans. It is also important to note that certain exceptions to the non-competition covenant may apply if the franchisee operates existing restaurants that offer similar food items, as detailed in the Pre-Existing Business Addendum to the Franchise Agreement.