Is a franchisee required to comply with a modified non-compete agreement from Afuri Ramen Dumpling?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
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.
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
According to Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, franchisees are generally subject to non-compete agreements, but there are exceptions for pre-existing businesses. Specifically, if a franchisee operates a pre-existing business that offers similar food items, the franchisee may be able to continue operating that business notwithstanding the non-competition covenants in the Franchise Agreement. This exception is detailed in the Pre-Existing Business Addendum (Exhibit 4) to the Franchise Agreement, which outlines the terms under which a franchisee can operate a pre-existing business concurrently with an Afuri Ramen Dumpling franchise. The confidentiality and non-disclosure covenants of the Franchise Agreement, however, remain in full effect.
The standard post-termination non-compete agreement lasts for two years after the termination, expiration, or transfer of the Franchise Agreement. During this period, the franchisee, along with their owners, shareholders, partners, directors, officers, employees, and agents (and their immediate families or households with knowledge of the Operations Manual or System), are restricted from participating in any business that offers ramen, other Japanese-style cuisine, Vietnamese pho, or any business offering products or services substantially similar to those of the Afuri Ramen Dumpling System.
The non-compete restrictions apply 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 Afuri Ramen Dumpling operates or has granted a franchise, and within the United States of America. The franchisee acknowledges that these restrictions are fair and reasonable and that compliance will not cause undue hardship or impair their ability to obtain suitable employment or income. However, the Pre-Existing Business Addendum provides an exception to these non-competition covenants, allowing franchisees to continue operating pre-existing businesses under certain conditions, as detailed in Exhibit 4 of the Franchise Agreement.