What is the consequence of violating the covenants not to compete in the Antioch Pizza Shop agreement?
Antioch_Pizza_Shop Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee acknowledges that Franchisor grants the rights to Franchisee in part in consideration of, and in reliance upon, Franchisee's agreement to deal exclusively with Franchisor.
Therefore, during the term of this Agreement, neither Franchisee nor any owner, nor any member of their immediate families, may, either directly or indirectly, for itself or through, on behalf of, or in conjunction with, any person or legal entity, own maintain, operate, engage in, consult with, or have any interest (as disclosed or beneficial owner) in any business which offers services or products which are the same as, or similar to, those offered by a franchised Restaurant (except another restaurant operated pursuant to a Franchise Agreement with Franchisor), including the sale of pizza, burgers, Italian sandwiches, dessert or related food items, or any entity which is granting franchises or licenses or entering into joint venture relationships for any business which offers products or services which are the same as, or similar to, those offered by a franchised Restaurant. (The ownership of 5% or less of a publicly traded company will not be deemed to be prohibited by this Paragraph.) Further, during the term of this Agreement, Franchisee shall not divert any customers or prospective customers from its Restaurant to any other business.
- (b) Post-Termination.
In addition, for two (2) years after the termination or expiration of this Agreement, Franchisee shall not carry on, be engaged in or advise in the establishment or operation of any business involving or related to the operation of a restaurant selling pizza, burgers, Italian sandwiches, dessert, or similar businesses described in section (a) above except (i) pursuant to Agreements with Franchisor, or (ii) if Franchisee is not then a party to any other Agreement with Franchisor, only at a site that is at least five and one-half (5 1/2) miles from any Antioch Pizza Shop™ (or successor name) restaurant (including Franchisee's former Restaurant) that is operating or being developed.
Franchisee agrees and acknowledges that this restriction represents only a limited one on Franchisee's ability to conduct a business and that the purpose of this covenant is not to deprive Franchisee of a means of livelihood, and will not do so, but is rather to protect the goodwill and interest of Franchisor, other franchisees and the System.
Source: Item 22 — Contracts (FDD pages 56–57)
What This Means (2025 FDD)
According to the 2025 Antioch Pizza Shop Franchise Disclosure Document, franchisees are subject to both in-term and post-termination non-compete covenants. During the term of the agreement, franchisees (including their owners and immediate family members) are prohibited from owning, operating, or having any interest in any business that offers products or services similar to those offered by an Antioch Pizza Shop restaurant. This restriction applies to businesses selling pizza, burgers, Italian sandwiches, desserts, or related food items, as well as entities granting franchises or licenses for similar businesses. An exception exists for owning 5% or less of a publicly traded company. Franchisees also cannot divert customers from their Antioch Pizza Shop restaurant to any other business during the agreement term.
Post-termination, for a period of two years after the agreement expires or is terminated, franchisees are restricted from engaging in or advising in the establishment or operation of any business involving or related to a restaurant selling pizza, burgers, Italian sandwiches, desserts, or similar businesses. This restriction applies unless the franchisee enters into agreements with Antioch Pizza Shop or operates at a site at least five and one-half miles from any existing or developing Antioch Pizza Shop restaurant.
The FDD states that the non-compete clause is designed to protect the goodwill and interests of Antioch Pizza Shop, its franchisees, and the overall system, without depriving the franchisee of a means of livelihood. The document also mentions that a court may modify the non-competition restrictions to ensure they are valid and enforceable. However, the FDD does not explicitly state the consequences of violating these covenants. A prospective franchisee should seek clarification from the franchisor regarding the specific legal and financial repercussions of breaching the non-compete agreements, as these could include legal action, financial penalties, or other remedies available to Antioch Pizza Shop.