After the Annex Brands franchise expires, terminates, or is not renewed, what is the geographic limit of the non-competition covenant?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Franchise | Summary | |
|---|---|---|---|
| Agreement | |||
| (m) | Conditions for our approval of transfer | 13.C to G | We: do not exercise our right of first refusal; Selling franchisee: satisfies all monetary obligations; are in compliance with franchise agreement and all other agreements with us or our affiliates; get lessor's consent to assignment or sublease; sign general release; sign non-compete agreement; give notice of assignment; give notice of offers to purchase and offers to sell; Transferee: meet our standards; sign then-current franchise agreement and related agreements; pay non refundable training and processing fee; pay new center/new owner marketing program deposit; pay any software license transfer fees and obtain required software programs and licenses; complete initial training; Selling franchisee and/or transferee: remodel business, add or delete equipment, change signage and other requirements to current standards, pay then current transfer fee, use the service of an escrow agent, pay escrow fees to escrow agent, and provide copies of escrow information and executed instructions to us. |
| (n) | Our right of first refusal to acquire your business | 13.H | Provide us with copy of written offer; we notify you of our intent to purchase on terms within 30 days. |
| (o) | Our option to purchase your business | Not applicable | Not applicable |
| (p) | Your death or disability | 9.H and 13.D | Franchised business must be transferred to approved person within 6 months; we may operate the business. |
| (q) | Non-competition covenants | 9.H, 16.D and | Cannot divert customers or have any interest in a |
| during the term of the franchise | Attachment 11 | competitive business. | |
| (r) | Non-competition covenants after transfer, or after the franchise expires, terminates or is not renewed | 13.C, 16.D and Attachment 11 | Cannot divert customers or have any interest in a competitive business within 5-mile radius of franchised business or any of our other franchised businesses for continuous 2-year period. |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 71–74)
What This Means (2025 FDD)
According to Annex Brands's 2025 Franchise Disclosure Document, if the franchise expires, terminates, or is not renewed, the franchisee is subject to a non-competition covenant. This covenant restricts the franchisee from diverting customers or having any interest in a competitive business within a 5-mile radius of the franchised business or any other Annex Brands franchised business. This restriction is in place for a continuous 2-year period.
This means that after the franchise agreement ends, a former Annex Brands franchisee cannot operate a similar business or be involved with a competitor within that 5-mile radius for two years. This is designed to protect Annex Brands's market share and brand recognition by preventing former franchisees from leveraging their experience and knowledge gained during the franchise term to compete against the system.
Non-compete clauses are common in franchising to protect the franchisor's investment in its brand and network. The specific terms, such as the geographic radius and duration, can vary among different franchise systems. Prospective franchisees should carefully consider the implications of these restrictions, as they can significantly impact their ability to pursue similar business ventures after leaving the franchise system. It is advisable to seek legal counsel to fully understand the scope and enforceability of the non-compete agreement in their specific jurisdiction.