Is an Aplus franchisee prohibited from operating a Competitive Business that they already owned at the time of early termination due to default?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
For a two-year period following a default that has led to early termination of this Agreement, you and any Affiliate shall not either directly or indirectly, for yourselves, or through, on behalf of, or in conjunction with any person, persons, or legal entity, own, maintain, advise, operate, engage in, be employed by, perform services for, consult with, or have any interest in, a relationship, or associate with any Competitive Business, and (a) is, or is intended to
be, located within the former Development Area; or (b) within a 25-mile radius of any APLUS Store in existence or under development at the time of such termination. Any Competitive Business that is already owned by you or your Affiliate at the time of early termination due to default is excepted from this Section 10.1. The obligations described in this Section 10.1 shall be tolled during any period of noncompliance and shall exclude any Competitive Business already open for business to the public at the time of expiration or termination of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, a franchisee is generally restricted from operating a Competitive Business for two years following early termination due to default. This restriction applies to businesses located within the former Development Area or within a 25-mile radius of any existing or developing Aplus store at the time of termination.
However, there is a specific exception to this non-compete clause. Any Competitive Business that the franchisee or their affiliate already owns at the time of the early termination due to default is exempt from this restriction. This means that if an Aplus franchisee already owns a competitive business before their franchise agreement is terminated for default, they are not required to cease operating that pre-existing business.
This exception provides some protection for franchisees who may have diversified business interests prior to entering into the Aplus franchise agreement. It's important to note that this exception only applies to businesses already owned at the time of termination; it does not allow franchisees to start new competitive businesses during the restricted period. The obligations are suspended during any period of noncompliance and will not include any Competitive Business already open to the public when the agreement expires or terminates.