What are the reasons Aplus provides for requiring restrictive covenants in the franchise agreement?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
- 17.3.2. Except as otherwise approved in writing by Franchisor, neither Franchisee, nor any holder of a legal or beneficial interest in Franchisee, nor any officer, director, executive, manager, or member of the professional staff of Franchisee, shall, for a period of two (2) years after the expiration or termination of this Agreement, regardless of the cause of termination, either directly or indirectly, for themselves or through, on behalf of or in conjunction with any person or entity solicit or otherwise attempt to induce or influence any customer or other business associate of Franchisor and or APLUS and/or SUNOCO franchisees to terminate or modify his, her or its business relationship with APLUS and/or SUNOCO; or
- 17.3.3 In furtherance of this Section 17, Franchisor has the right to require certain individuals to execute standard form nondisclosure agreements in a form the same as or similar to the Nondisclosure Agreement attached as Attachment 2.
- 17.3.4 The two (2) 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, the company requires restrictive covenants in its franchise agreement for several reasons. These covenants are acknowledged by the franchisee as fair, reasonable, and justifiably required. Aplus implements these measures to protect its business interests and maintain the integrity of its franchise system.
Specifically, Aplus uses restrictive covenants to safeguard its trade secrets, goodwill, and confidential information. These covenants also serve as an inducement for Aplus to grant a franchise to the franchisee, indicating that the agreement is contingent on these protections. Furthermore, the restrictions are in place to protect Aplus's contractual relationships with its other franchisees, ensuring that no single franchisee can unfairly impact the broader network.
Additionally, Aplus includes these covenants to protect against the costs incurred in training the franchisee and their staff. This suggests that Aplus invests significantly in training and wants to prevent franchisees from using this training to benefit a competing business after leaving the Aplus system. These restrictive covenants are essential elements of the Franchise Agreement, and Aplus would not enter into the agreement without them.