For how long after termination or expiration of the Aplus Franchise Agreement are Franchisee, Personal Guarantor, or any Owner prohibited from performing any act injurious to the goodwill associated with the Marks or the System?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
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)
According to Aplus's 2024 Franchise Disclosure Document, for two years after the termination or expiration of the Franchise Agreement, the franchisee, any personal guarantor, any holder of legal or beneficial interest in the franchisee, or any owner, officer, director, executive, manager, or member of the professional staff of the franchisee is prohibited from performing any act that could be harmful to the goodwill associated with Aplus's Marks or System. This restriction applies whether the actions are taken directly or indirectly, for themselves or in conjunction with any other person or business entity.
In the event that the termination of the Aplus Franchise Agreement is due to the franchisee's or any owner's default, the franchisee, each personal guarantor, and any owner are further restricted from owning an interest in, investing in, managing, operating, performing services for, consulting with, or being employed by any Competitive Business located within 20 miles of the franchised business or any other Aplus store. This restriction also lasts for two years after termination or expiration of the Agreement. However, this restriction does not apply to a Competitive Business that was already owned by the franchisee or an affiliate at the time of termination.
It is important to note that the two-year period during which these restrictions apply can be extended if there is any non-compliance with these terms. This means that if a franchisee violates these restrictions, the two-year clock may be paused until the non-compliance is resolved, effectively prolonging the period during which the franchisee is subject to these limitations. This provision is designed to protect Aplus's brand and market position by preventing former franchisees from leveraging their knowledge and experience to compete unfairly.
These post-termination restrictions are common in franchising to protect the franchisor's brand, trade secrets, and customer relationships. Prospective Aplus franchisees should carefully consider these limitations and how they might impact their future business opportunities before entering into a franchise agreement. It is advisable to seek legal counsel to fully understand the scope and implications of these restrictive covenants.