What is the geographic scope of the non-competition covenant after termination or expiration of an Auntie Annes franchise?

According to Auntie Annes's 2024 Franchise Disclosure Document, after the franchise is terminated or expires, a franchisee is restricted from involvement in a competitive business for 12 months. This restriction applies at the Accepted Location, within 3 miles of the franchisee's Accepted Location, or within 3 miles of any Auntie Annes Shop. Additionally, the franchisee is prohibited from diverting or attempting to divert any business from any Auntie Annes Shop.

This non-compete clause means that a former Auntie Annes franchisee cannot operate or be involved in a similar business that offers products similar to Auntie Annes within the specified geographic area. The restriction is in place for a year after the franchise agreement ends, whether through expiration or termination. The geographic scope includes the original location and a three-mile radius around both the former franchisee's location and any other Auntie Annes location.

The non-compete aims to protect Auntie Annes's market share and brand reputation by preventing former franchisees from using their knowledge of the business to compete unfairly. It also prevents them from leveraging customer relationships or insights gained during their time as a franchisee to harm the Auntie Annes system. This is a fairly standard non-compete clause for franchise agreements.

Prospective franchisees should carefully consider the implications of this non-compete agreement. They should evaluate whether the restrictions would unduly limit their future business opportunities if they decide to leave the Auntie Annes system. It is also important to understand how the 'Accepted Location' is defined in the Franchise Agreement, as this will be the starting point for measuring the three-mile radius.