What are the non-competition covenants after the Auntie Annes 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, franchisees are subject to certain non-competition covenants. For a period of 12 months, a former franchisee cannot be involved in a competitive business at the Accepted Location. This restriction also extends to a 3-mile radius around the former franchisee's Accepted Location, as well as within 3 miles of any other Auntie Anne's Shop.
Additionally, the franchisee is prohibited from diverting or attempting to divert any business from any Auntie Anne's Shop during this 12-month period. This means a former franchisee cannot actively solicit or take actions that would cause customers to choose their new business over existing Auntie Anne's locations.
It is important to note that disputes related to these non-competition covenants are governed by the laws of the state in which the Auntie Anne's Shop is located, not Georgia law, which generally applies to other disputes under the franchise agreement. Franchisees should consult with legal counsel to fully understand the implications of these non-competition covenants in their specific state.