After a transfer of an Afuri Ramen Dumpling franchise, what obligations does the franchisee remain bound by?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
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).
- 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.
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
According to the 2024 Afuri Ramen Dumpling Franchise Disclosure Document, a franchisee who transfers their franchise is still subject to certain obligations, primarily related to non-competition. Specifically, for two years after the transfer, the franchisee (and their owners, shareholders, partners, directors, officers, employees, and agents, as well as their immediate family members or households with knowledge of the Operations Manual or System) cannot participate in any business involved in offering or selling ramen, other Japanese-style cuisine, Vietnamese pho, or any business offering similar products or services to the Afuri Ramen Dumpling system.
This non-compete agreement applies within the franchise territory, a 50-mile radius of the franchise territory, a 50-mile radius of any location where Afuri Ramen Dumpling operates or has granted a franchise, and within the United States. This means that even after selling the franchise, the former franchisee is restricted from engaging in competitive businesses within a significant geographical area for a defined period.
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 (Exhibit 4) to the Franchise Agreement. In such cases, the franchisee may continue to operate these pre-existing businesses, potentially at existing or new locations, notwithstanding the non-competition clauses. It is important to note that the confidentiality and non-disclosure covenants of the Franchise Agreement remain in effect regardless of any pre-existing business exceptions.
Prospective franchisees should carefully review Section 6.7 and Exhibit 4 of the Afuri Ramen Dumpling Franchise Agreement to fully understand the scope and limitations of the non-compete obligations and any potential exceptions related to pre-existing businesses. Understanding these post-transfer obligations is crucial for planning future business ventures after selling the franchise.