Under what circumstances might Afuri Ramen Dumpling waive the non-compete covenant?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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). 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 Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, the non-compete covenant may be waived if a franchisee operates a pre-existing business that offers similar food items. This exception is detailed in the Pre-Existing Business Addendum (Exhibit 4) to the Franchise Agreement. The franchisee can continue to operate the pre-existing business, potentially including new or additional locations under the same brand name, offering the same goods and services, despite the non-competition covenants in Sections 5.7.2 and 6.7 of the Franchise Agreement. However, the confidentiality and non-disclosure covenants of the Franchise Agreement remain in full effect.
Several conditions apply to this waiver. First, the pre-existing business must be operated separately and independently from the Afuri Ramen Dumpling franchise. Second, any existing agreements related to the pre-existing business must not prohibit the franchisee's participation in the Afuri Ramen Dumpling franchise. Third, no third-party consent should be required for the franchisee to acquire and operate the Afuri Ramen Dumpling franchise, other than the consents of the franchisee and franchisor. Finally, there should be no existing restrictive covenants, other than those waived by the pre-existing business, that would be breached by the franchisee's obligations to Afuri Ramen Dumpling under the Franchise Agreement.
This waiver allows franchisees with established restaurants to integrate an Afuri Ramen Dumpling franchise without divesting their existing business. However, it is crucial for prospective franchisees to carefully review Exhibit 4 and ensure full compliance with all conditions to maintain the waiver. The franchisee must also maintain confidentiality and not disclose proprietary information related to the Afuri Ramen Dumpling system, even while operating the pre-existing business.