Are there any exceptions to the in-term and post-term non-competition covenants for Afuri Ramen Dumpling franchisees with pre-existing businesses?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
ing 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. This indemnity shall survive termination of the Franchise Agreement. This indemnity is intended to be in addition to, and does not reduce the scope of, the indemnification provisions in the Franchise Agreement.
AFURI FRANCHISE INC.
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
According to Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, there are exceptions to the in-term and post-term non-competition covenants for franchisees with pre-existing businesses. Franchisees (or their owners or affiliated entities) may continue to operate pre-existing businesses, notwithstanding the non-competition covenants in the Franchise Agreement. This exception is detailed in Exhibit 4, the Pre-Existing Business Addendum.
However, this exception is not without conditions. The pre-existing business must be operated separately and independently from the Afuri Ramen Dumpling franchise. Additionally, any existing agreements related to the pre-existing business must not prohibit the franchisee's participation in the Afuri Ramen Dumpling franchise. The confidentiality and non-disclosure covenants within the Franchise Agreement remain in full effect, even with the pre-existing business exception.
Afuri Ramen Dumpling franchisees are restricted from establishing new businesses that would violate the non-competition agreements, except as explicitly permitted by the pre-existing business addendum. Franchisees must also indemnify Afuri Ramen Dumpling against any losses or costs arising from breaches of representations, the operation of the pre-existing business, or any negligent acts related to the pre-existing business. This indemnification extends beyond the termination of the Franchise Agreement.
This policy regarding pre-existing businesses is relatively common in franchising, as it allows individuals with existing business ventures to become franchisees without necessarily divesting their current interests. However, it's crucial for prospective Afuri Ramen Dumpling franchisees to carefully review the Pre-Existing Business Addendum (Exhibit 4) and understand the specific limitations and obligations associated with operating a pre-existing business alongside the franchise.