Under what circumstances can a franchisee of Afuri Ramen Dumpling continue to operate a pre-existing business?
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).
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
According to Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, a franchisee (or their owners or affiliated entities) may continue to operate a pre-existing business despite the in-term and post-term non-competition covenants in the Franchise Agreement. This exception is detailed in the Pre-Existing Business Addendum (Exhibit 4) to the Franchise Agreement. The confidentiality and nondisclosure covenants of the Franchise Agreement, however, remain in full effect.
The pre-existing business must be operated separately and independently from the Afuri Ramen Dumpling franchise. Any existing agreements related to the pre-existing business must 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. Furthermore, no third-party consent should be required for the acquisition of the Afuri Ramen Dumpling franchise to be legally binding, other than the consents of the franchisee and franchisor.
The franchisee must ensure that there are no restrictive covenants binding on them or their partners, owners, agents, representatives, or employees that would be breached by the acquisition and operation of the Afuri Ramen Dumpling franchise. However, the franchisee is required to indemnify and defend Afuri Ramen Dumpling against any losses, costs, or liabilities arising from any breach of representations, the operation of the pre-existing business, or any negligent act or omission by the franchisee or their business. Franchisees will not establish any new businesses that would violate the franchise agreement's non-competition terms, except as expressly permitted in the Pre-Existing Business Addendum.