Can an Afuri Ramen Dumpling franchisee engage in any business activity that conflicts with their franchise obligations?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
| between | ("Franchisor"), |
|---|---|
| AFURI | |
| FRANCHISE | |
| INC., | |
| an | |
| Oregon | |
| corporation | |
| and | |
| and ("Franchisee"). | |
| It amends | |
| the franchise agreement ("Franchise Agreement") between the parties of this same date. | |
| 1. | Franchisee's Representations and Warranties. Franchisee represents and warrants to |
| Franchisor as follows: | |
| 1.1 | |
| Franchisee (or one or more owners or affiliated entities) currently owns and operates a | |
| business (or businesses) known as: | |
| ("Pre-Existing Business"). | |
| 1.2 | |
| The Pre-Existing Business provides the following goods and services to its customers at | |
| the following locations: | |
| 1.2.1 Goods and services of Pre-Existing Business(es): | |
| 1.2.2 Location(s) of Pre-Existing Business(es): | |
- 1.3 The Pre-Existing Business(es) will continue to be operated separately and independently from the Afuri franchise.
- 1.4 Any and all existing franchise agreements, stockholder agreements, membership agreements, partnership agreements, option agreements, or any other agreements or third-party rights relating to the Pre-Existing Business, do not contain any covenants, terms and conditions which do now, or may in the future, prohibit the execution of the Franchise Agreement and the participation of any of the owners, managers or employees of the Franchisee in the Afuri franchise.
- 1.5 Other than the consents of Franchisee and Franchisor, there is no other third-party consent required for the acquisition of the Afuri franchise to be legally binding and effective.
- 1.6 There are no existing restrictive covenants, other than those which the Pre-Existing Business has waived, binding on Franchisee or any of its partners, owners, agents, representatives or employees that would be breached by the acquisition and operation of the obligations of Franchisee to Franchisor in the Franchise Agreement and related agreements.
- 1 Afuri Franchise Agreement: Exhibit 4 2. Exceptions to In-Term and Post-Term Non-Competition Covenants. Franchisee (or its owners or affiliated entities) may continue to operate the Pre-Existing Business(es) [Alternative #1: only
at the locations indicated above][ Alternative #2: including any new or additional locations under the same brand name(s) and offering the same goods and services as the Pre-Existing Business(es)] notwithstanding the in-term and post-term non-competition covenants in the Franchise Agreement (in Sections 5.7.2 and 6.7 of the Franchise Agreement, respectively). However, the confidentiality and nondisclosure covenants of the Franchise Agreement are not affected by this Addendum and remain in full force and effect.
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- No Other Exception. Except as expressly permitted by Section 2 above (if applicable), Franchisee will not establish any new or additional businesses or participate in any other activities that would violate the Franchise Agreement's in-term or post-term non-competition covenants referenced above.
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- Indemnification. Franchisee shall indemnify, defend and hold harmless Franchisor and its affiliates against all losses, costs, proceedings, judgments, liabilities, expenses, court costs, and reasonable fees of attorneys and other professionals arising out of or related to: (1) any breach of the representations and warranties set out in this Addendum; (2) the operation of any Pre-Existing Business; or (3) any willful or negligent act or omission of Franchisee or Franchisee's owners, directors, officers, employees or agents (or those of any Pre-Existing Business). This indemnity includes but is not limited to any act or omission that contributes to any economic damage, bodily injury, sickness, disease or death.
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
According to the 2024 Afuri Ramen Dumpling Franchise Disclosure Document, franchisees are generally restricted from engaging in business activities that directly compete with the Afuri Ramen Dumpling franchise, both during the term of the franchise agreement and for a period after its termination or transfer. This non-compete covenant extends to the franchisee, their owners, shareholders, partners, directors, officers, employees, and agents, as well as members of their immediate families or households who have access to the Operations Manual or System.
Specifically, the non-compete agreement prevents these individuals from participating in any business involved in the offer, sale, rental, internet dissemination, or promotion of ramen, other Japanese-style cuisine, Vietnamese pho, or any business offering products or services substantially similar to those of the Afuri Ramen Dumpling System. This restriction applies within the Franchise Territory, a 50-mile radius of the Franchise Territory, a 50-mile radius of any location where Afuri operates or has granted a franchise, and within the United States of America.
However, there are exceptions to these non-competition covenants if the franchisee operates pre-existing businesses that offer similar food items, as detailed in the Pre-Existing Business Addendum to the Franchise Agreement. These pre-existing businesses can continue to operate, potentially including new or additional locations under the same brand, despite the non-compete clauses. The franchisee must ensure that any existing agreements related to the pre-existing business do not prohibit the execution of the Franchise Agreement or the participation of the franchisee's owners, managers, or employees in the Afuri Ramen Dumpling franchise.
The franchisee also agrees not to use Afuri Ramen Dumpling's confidential information or system except as authorized and must ensure their owners, board of directors, employees, and agents adhere to the same non-use covenant. Recipes are explicitly included in the confidential information that cannot be disclosed or used outside the context of the Afuri Ramen Dumpling franchise.