What are the non-compete restrictions for an Auntie Annes franchisee after the franchise is terminated or expires?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in Franchise Agreement | Summary |
|---|---|---|
| o. You must comply with our right of first refusal. p. If you operate a Co-Branded Shop, the Co-Branded Agreement or Co- Branded Franchise are transferred at the same time. | ||
| FA: 16.4 (non-control transfers) | a. You give us prior written notice of the transfer. b. You pay all sums owed. c. You are not in default d. Transferee meets qualifications e. Transferee signs assignment and guaranty f. You and your guarantors and owners sign a general release. g. You remain liable for pre-Transfer obligations. h. You pay us a Transfer Fee. | |
| FA: 16.5 (related party transfers) | a. You give us prior written notice of the transfer. b. You are not in default c. Transferee meets qualifications d. Transferee assumes in writing the Franchise Agreement and the guaranty. e. You may not be in default under the Franchise Agreement. f. You pay us a Transfer Fee. g. You and your guarantors and owners must sign a general release and remain liable for pre-Transfer obligations | |
| n. Our right of first refusal to acquire your business | FA: 16.8 | We can match any offer for your Shop or substantially all interests in your entity. |
| o. Our option to purchase your business | FA: 18.4 | We may purchase your Goods related to the Shop at the fair market value (exclusive of good will) and may purchase your Accepted Location if you own it or your interest in any lease. |
| p. Your death or disability | FA: 16.6 | Upon 180 days from your death or permanent incapacity you must transfer all rights and interests to buyer that complies with Transfer provisions, except no Transfer Fee will be due. |
| q. Non-competition covenants during the term of the franchise | FA: 15.4 | No involvement in a competitive business (generally, similar types of businesses that offer products the same or similar to the Approved Products) anywhere. You may not divert or attempt to divert any business or potential business, misuse vendor relationships, or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Proprietary Marks and the System. |
| r. Non-competition | FA: 15.4.B. | For 12 months after expiration or termination, no involvement in a |
| covenants after the | competitive business at the Accepted Location, within 3 miles of your | |
| franchise is terminated or | Accepted Location, or within 3 miles of any Shop; and no diverting or | |
| expires | attempting to divert any business from any Shop. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTIONS (FDD pages 86–91)
What This Means (2024 FDD)
According to Auntie Anne's 2024 Franchise Disclosure Document, after the franchise agreement expires or is terminated, a franchisee faces specific non-compete restrictions. For a period of 12 months, the franchisee is prohibited from involvement in any competitive business. This restriction applies to the physical location of the former Auntie Anne's shop, specifically the 'Accepted Location,' as well as within a three-mile radius of that location. The non-compete also extends to three miles from any other Auntie Anne's shop.
In addition to the geographical and business-type restrictions, the franchisee is also barred from actively trying to divert business away from any Auntie Anne's location. This means a former franchisee cannot solicit customers, vendors, or employees of Auntie Anne's, or take any actions that could negatively impact the brand's goodwill or business operations.
These post-term non-compete clauses are designed to protect Auntie Anne's market share and brand reputation. Such restrictions are common in franchising to prevent former franchisees from using the franchisor's trade secrets, customer relationships, and brand recognition to their advantage in a competing business immediately after leaving the system. Prospective franchisees should carefully consider the implications of these restrictions, especially if they plan to remain in the same geographic area and industry after their franchise agreement ends.