What does Annex Brands consider when evaluating 'competition from other businesses'?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
WHEREAS, Covenantor acknowledges that ABI has a legitimate business interest in protecting its franchisees from unfair competition by an existing or former franchisee that has or had special, intimate knowledge of ABI's valuable trade secrets and Confidential Information and proprietary operating methods;
WHEREAS, Covenantor acknowledges that ABI has a legitimate business interest in protecting its franchisees from unfair competition by an existing or former ABI franchisee that transfers (without permission) the goodwill associated with ABI's Marks to a business that competes with ABI's franchisees;
WHEREAS, Covenantor acknowledges that ABI has a legitimate business interest in protecting its franchisees from unfair competition by an existing or former franchisee that is able to take advantage of the knowledge and experience gained as an ABI franchisee by operating its new business without having to continue to pay royalty fees and other fees for access to such information, thereby placing at a competitive disadvantage such remaining ABI franchisees that continue to abide by their contractual obligations;
WHEREAS, Covenantor acknowledges that (1) ABI has a legitimate business interest in refranchising the formerly protected area of a former franchisee, and (2) ABI would suffer irreparable harm absent this Agreement because it would be unable to attract new franchisees to the area served by its former franchisee;
WHEREAS, Covenantor acknowledges that ABI has a legitimate business interest in protecting its franchisees from unfair competition by an existing or former franchisee that diverts or attempts to divert business from any Retail Center or Commercial Logistics Center to a competitor; and
Source: Item 22 — Contracts (FDD pages 109–110)
What This Means (2025 FDD)
The 2025 Franchise Disclosure Document outlines several considerations Annex Brands takes into account regarding competition, primarily focusing on protecting its franchisees from unfair competition. Annex Brands acknowledges a legitimate business interest in safeguarding its franchisees from unfair competition arising from various sources. This includes existing or former franchisees with access to the company's trade secrets, confidential information, and proprietary operating methods. They also aim to prevent franchisees from unfairly transferring goodwill associated with Annex Brands' trademarks to competing businesses.
Annex Brands also recognizes the need to protect franchisees from competition by those who might exploit their knowledge gained as franchisees without continuing to pay royalties and fees. This ensures that franchisees who continue to meet their contractual obligations are not placed at a competitive disadvantage. Additionally, Annex Brands aims to protect its ability to refranchise areas previously served by former franchisees, ensuring they can attract new franchisees without facing unfair competition from the former operator.
To address these concerns, Annex Brands requires franchisees to agree to certain post-term non-competition and non-solicitation covenants. These covenants restrict former franchisees from engaging in activities that could harm the Annex Brands system. These restrictions include diverting business from existing centers, operating competing businesses within a specified radius (typically 5 miles), and entering into business relationships with terminated corporate accounts. The duration of these restrictions varies, with some lasting up to two years, and the company retains the right to reduce the scope of these restrictions at its discretion.