In the Aplus franchise agreement, are the covenants in Sections 7 and 17 considered independent of other provisions?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
7.5. Reasonableness of Restrictions
Franchisee acknowledges that the restrictive covenants contained in this Section 7 are essential elements of this Agreement and that without their inclusion, Franchisor would not have entered into this Agreement. Franchisee acknowledges that each of the terms set forth herein, including the restrictive covenants, is fair and reasonable and is reasonably required for the protection of Franchisor, the System, the Marks, Franchisor's goodwill, and Franchisor's franchise system; and Franchisee expressly waives any right to challenge these restrictions as being overly broad, unreasonable, overly burdensome or otherwise unenforceable. Franchisee affirms that it has other means of earning a living from its employment experience prior to becoming a franchisee.
17.3. Restrictive Covenants
- 17.3.1. Franchisee acknowledges that the restrictive covenants contained in this Agreement are fair and reasonable and are justifiably required for purposes including, but not limited to, the following:
- (a) To protect the Trade Secrets, Goodwill, and Confidential Information of Franchisor;
- (b) To induce Franchisor to grant a Franchise to Franchisee;
- (c) To protect Franchisor's contractual relationships with other franchise; and
- (d) To protect Franchisor against its costs in training Franchisee and its officers, directors, executives, professional staff and Designated Managers.
7.3. Exclusive Relationship
For two years after termination or expiration of this Agreement, neither Franchisee nor each personal guarantor as indicated in Attachment 3 ("Personal Guarantor"), any other holder of a legal or beneficial interest in Franchisee (or any member of their immediate families or households), nor any Owner, officer, director, executive, manager or member of the professional staff of Franchisee, either directly or indirectly, for themselves, or through, on behalf of or in conjunction with any person, partnership, corporation, limited liability company or other business entity, do or perform, directly or indirectly, any act injurious or prejudicial to the goodwill associated with the Marks or the System. Further, and only in the event of Franchisee or any Owner's default of this Agreement which has led to premature termination of this Agreement, Franchisee, each Personal Guarantor, and any Owner, shall not own an interest in, invest in, manage, operate, or perform services, consult with, or be employed by or for any Competitive Business located within 20 miles of the Franchised Business or any other APLUS store, for two years after termination or expiration of this Agreement; a Competitive Business that is owned by Franchisee or an affiliate at the time of the termination is excepted from this restriction. The two-year period shall be tolled during any event of non-compliance.
Source: Item 23 — RECEIPT (FDD pages 68–302)
What This Means (2024 FDD)
Based on the 2024 Aplus Franchise Disclosure Document, Sections 7 and 17 include restrictive covenants that Aplus franchisees acknowledge as essential elements of the agreement. Specifically, franchisees agree that these covenants are fair, reasonable, and necessary to protect Aplus's interests, system, marks, goodwill, and franchise network.
The franchisee expressly waives any right to challenge these restrictions, affirming they are not overly broad, unreasonable, or unenforceable. This waiver indicates that Aplus places significant importance on these covenants and seeks to prevent franchisees from contesting their validity.
Section 7.3 outlines that for two years post-termination or expiration of the agreement, the franchisee, personal guarantors, and anyone with a legal or beneficial interest in the franchisee cannot engage in activities that harm the goodwill associated with Aplus's marks or system. Furthermore, if the agreement is terminated due to the franchisee's default, they are restricted from owning, managing, or working for a competitive business within 20 miles of the Aplus store for two years, with an exception for businesses owned by the franchisee at the time of termination. Section 17.3.1 states the franchisee acknowledges the restrictive covenants are fair and reasonable to protect trade secrets, goodwill, and confidential information of Aplus, to induce Aplus to grant the franchise, to protect Aplus's contractual relationships with other franchisees, and to protect Aplus against its costs in training the franchisee.
These acknowledgements and waivers suggest that Aplus intends for these covenants to be strongly enforceable and independent of other potential disputes or breaches of the agreement. A prospective franchisee should carefully consider the implications of these covenants and seek legal counsel to fully understand their rights and obligations.