What are my obligations regarding further Aplus store development if the Development Agreement is terminated?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in | Summary | |
|---|---|---|---|
| i. Developer’s obligation on termination/non-renewal | Sections 2.2 and 10.2 | You will have no further right to develop or operate additional APLUS Stores which are not, at the time of termination, the subject of a then existing franchise agreement between you and us. You may continue to own and operate all APLUS Stores under then existing Franchise Agreements. | |
| r. | Non-competition covenants after the Agreement is terminated or expires | Section 10.2 | In the event you or an affiliate is in default of the Development Agreement which has led to premature termination of the Development Agreement, you and any owner are prohibited from owning an interest in, investing in, managing, operating, or performing services, consulting with, or be employed by or for any competitive business located in the development area or located within 25 miles of any APLUS Store in existence at under development at the time of such termination, for two years after termination of the Development Agreement. Any competitive business owned by you or an affiliate |
| Development Agreement | at the time of early termination of the development agreement due to default is excepted from this restriction. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 53–64)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, if the Development Agreement is terminated, you will not have the right to develop or operate additional Aplus stores. This applies to any stores that are not already subject to an existing franchise agreement between you and Aplus at the time of termination. However, you can continue to own and operate Aplus stores under existing Franchise Agreements.
In cases where the Development Agreement is prematurely terminated due to your default, a non-compete clause comes into effect. This prevents you and any owner from having an interest in, investing in, managing, operating, or consulting with any competitive business. This restriction applies to businesses located within the development area or within 25 miles of any existing or under-development Aplus store at the time of termination. This non-compete period lasts for two years following the termination of the Development Agreement.
It is important to note that this non-compete restriction does not apply to any competitive business you or an affiliate owned at the time of the early termination of the development agreement due to default. This exception could be significant if you already have existing business interests in the same sector. Prospective franchisees should carefully consider these implications, especially concerning the potential loss of development rights and the restrictions imposed by the non-compete agreement upon termination.