factual

What franchisee obligations to Afuri Ramen Dumpling continue even after termination of the Franchise Agreement?

Afuri_Ramen_Dumpling Franchise · 2024 FDD

Answer from 2024 FDD Document

ssign Franchise Territory Upon Termination**. Upon expiration or termination of this Agreement, we may immediately license or franchise the Franchise Territory to another person or may operate Afuri businesses within the Franchise Territory.

6.7 You and Your Owners Not to Compete on Expiration, Termination or Transfer of Agreement.

  • 6.7.1 Post-Termination Non-Compete. This covenant will apply for two years after termination, expiration or transfer of this Agreement. In express consideration for this Agreement, you will assure that you and your owners, shareholders, partners, directors, officers, employees, and agents, and the members of their immediate families or households (who have actual knowledge of or access to the Operations Manual or System), will not directly or indirectly participate as an owner, shareholder, director, partner, officer, employee, consultant, franchisor, franchisee, distributor, advisor or agent, or serve in any other capacity in any business engaged directly or indirectly in the offer, sale, rental, internet dissemination, or promotion of: (1) ramen, (2) other Japanese style cuisine, (3) Vietnamese pho, or (4) any business that offers products or services that are essentially the same as, or substantially similar to, the products and services that are part of the System. This covenant applies within the Franchise Territory, within a 50-mile radius of the Franchise Territory, within a 50-mile radius of any location or franchise territory where we operate or have granted the franchise to operate an Afuri business, and within the United States of America. 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 this Agreement (Exhibit 4).
  • 6.7.2 Your Acknowledgments. You acknowledge and confirm that the time, content and geographical restrictions contained in this Section are fair and reasonable. They are not the result of overreaching, duress, or coercion of any kind by us. You further acknowledge and confirm that your observance of the covenants contained in this Agreement will not cause you any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained in this Agreement will not impair your ability to obtain employment commensurate with your abilities and on terms fully acceptable to you, or otherwise to obtain income required for the comfortable support of your family and the satisfaction of your creditors. Your knowledge of the System would cause our franchise system serious injury and loss if you use the knowledge to the benefit of a competitor or to compete with us or our franchisees.
  • 6.7.3 Lawful Scope. If, for any reason, any provision set forth in this Subsection exceeds any lawful scope or limit as to duration, geographic coverage, or otherwise, it is agreed that the provision will nevertheless be binding to the full scope or limit allowed by law or by a court of law. The duration, geographic coverage and scope allowable by law or court of law shall apply to this Agreement.

Source: Item 23 — Receipts (FDD pages 50–189)

What This Means (2024 FDD)

According to the 2024 Afuri Ramen Dumpling Franchise Disclosure Document, franchisees and their owners are subject to a post-termination non-compete covenant for two years after the termination, expiration, or transfer of the Franchise Agreement. This means that for a period of two years, the franchisee and related parties are restricted from participating in businesses that offer ramen, other Japanese-style cuisine, Vietnamese pho, or any business offering products or services substantially similar to those in the Afuri Ramen Dumpling system.

The non-compete covenant extends to various geographical areas, including the Franchise Territory itself, a 50-mile radius around the Franchise Territory, a 50-mile radius around any location where Afuri Ramen Dumpling operates or has granted a franchise, and throughout the United States. This broad scope aims to protect Afuri Ramen Dumpling's market and brand integrity by preventing former franchisees from leveraging their knowledge of the system to compete against it.

However, there are exceptions to these non-competition covenants if the franchisee operates pre-existing restaurants that offer similar food items, as detailed in the Pre-Existing Business Addendum. Even with these exceptions, the confidentiality and non-disclosure covenants of the Franchise Agreement remain in full effect, meaning that franchisees must continue to protect Afuri Ramen Dumpling's confidential information even after the agreement ends. Franchisees acknowledge that these restrictions are fair and reasonable and will not cause undue hardship, ensuring they can still find suitable employment or income opportunities.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.