What activities are prohibited under the Aw covenant not to compete?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
of this Section 16.
- 16.10 Continuing Obligations. All obligations of the Company and you which expressly or by their nature survive the expiration or termination of this Agreement will continue in full force and effect subsequent to and notwithstanding its expiration or termination and until they are satisfied or by their nature expire.
17. POST-TERM COVENANT NOT TO COMPETE.
- 17.1 Covenant Not To Compete. Upon assignment, termination or expiration (without renewal) of this Agreement, you (and your Owners) agree that for a period of two (2) years, commencing on the effective date of assignment, termination or expiration, or the date on which you begin complying with the covenants herein, whichever is later, you (and your Owners) will not:
- (a) have any direct or indirect interest as an owner, investor, partner, director, officer, employee, consultant, representative or agent, or in any other capacity, in (a) any restaurant business selling products or services substantially similar to a Papa Ray's Pizza Restaurant concept then being offered by us (except other Papa Ray's Pizza Restaurants you are operating pursuant to franchise agreements with us), which is located (i) within ten (10) miles of the Premises of your Papa Ray's Pizza Restaurant or (i) within ten (10) miles of the premises of any other Papa Ray's Pizza Restaurant,
- or (b) any entity which is granting franchises or licenses or entering into joint venture relationships for any restaurant business which offers products or services similar to those offered by a Papa Ray's Pizza Restaurant, other than the ownership of securities traded on a stock exchange or on the over-the-counter market that represent 5% or less of that class of securities.
- (b) directly or indirectly divert or attempt to divert any former business or customer of your Papa Ray's Pizza Restaurant to any competitive business;
- (c) employ or seek to employ any person employed by us or our affiliate, or otherwise directly or indirectly induce or seek to induce such person to leave his or her employment; and
- (d) directly or indirectly, solicit or sell products or services to any former customer of your Papa Ray's Pizza Restaurant.
- 17.2 Court Modification of Agreement. You agree that this form of Agreement is prepared for use in many jurisdictions with differing public policies and that such public policies change. Accordingly, you agree that the prevailing non-competition restrictions set forth above may be modified by a Court to the extent necessary to make the non-competition agreements valid and enforceable against you.
- 17.3 Enforcement of Covenants Not to Compete. You acknowledge that violation of the covenants not to compete contained in this Agreement would result in immediate and irreparable injury to us for which no adequate remedy at law will be available. Accordingly, you hereby acknowledge that we may seek to obtain the entry of an injunction prohibiting any conduct by you or your Owners in violation of the terms of the covenants not to compete set forth in this Agreement. You expressly agree that it may conclusively be presumed that any violation of the terms of said covenants not to compete was accomplished by and through your unlawful use of our Confidential Information. Further, you expressly agree that the existence of any claims you may have against us, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by us of the covenants not to compete set forth in this Agreement. You further agree to pay all costs and expenses (including reasonable attorneys' and experts' fees) incurred by the us in connection with the enforcement of those covenants not to compete set forth in this Agreement.
18. DISPUTE RESOLUTION
18.1 Mandatory Mediation. Except for actions pursuant to Paragraph 18.3 below, prior to the initiation of arbitration or litigation by either party pursuant to this Agreement, the parties must make a good faith effort to resolve any controversies between them by non-binding mediation either through a mutually acceptable mediator or through an established mediation service selected by us (in either case, "Mediator"). Prior to mediation, each party involved in mediation shall sign the standard confidentiality agreement reasonably required by Mediator or a confidentiality agreement reasonably required by us if the Mediator does not have a standard confidentiality agreement.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, both during the term of the agreement and after its termination or expiration, franchisees are subject to certain non-compete restrictions. During the term of the agreement, franchisees and their owners are prohibited from having any interest in any business offering products or services similar to those of an Aw restaurant or any entity granting franchises or licenses for similar businesses. However, owning 5% or less of a publicly traded company is not prohibited. Franchisees are also prohibited from diverting customers, employing individuals employed by Aw or its affiliates, or soliciting or selling to former customers of their Aw restaurant.
Post-term, for a period of two years after the agreement's termination, expiration, or assignment, franchisees and their owners cannot have a direct or indirect interest in any restaurant business selling similar products or services to Aw, within ten miles of their former Aw restaurant or any other Aw restaurant. An exception exists for other Aw restaurants operated under a franchise agreement with them.
These restrictions are designed to protect Aw's confidential information, customer base, and market share. Aw can seek injunctions to prevent violations of these covenants and recover all costs and expenses, including attorney's fees, associated with enforcing these non-compete agreements. The FDD also states that the non-competition restrictions may be modified by a court to ensure they are valid and enforceable.
Prospective franchisees should carefully consider the scope and duration of these non-compete clauses, as they could significantly limit their business activities after leaving the Aw system. It is important to understand the geographic limitations and the types of businesses that are considered competitive. Franchisees should also be aware of the potential legal costs associated with violating these covenants.