What activities are prohibited under the post-term covenant not to compete for an Aw franchise?
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.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the post-term covenant not to compete outlines several restrictions for franchisees after the termination, expiration, or assignment of their franchise agreement. This covenant lasts for two years, starting from the effective date of termination, expiration, or assignment, or the date the franchisee begins complying with the covenants, whichever is later.
During this period, franchisees (and their Owners) are prohibited from having any direct or indirect interest in any restaurant business selling products or services substantially similar to a Papa Ray's Pizza Restaurant concept then being offered by Aw, except for other Papa Ray's Pizza Restaurants they operate under franchise agreements with Aw. This restriction applies within ten miles of the former franchise location or any other Papa Ray's Pizza Restaurant. Franchisees are also barred from involvement with any entity that grants franchises or licenses for similar restaurant businesses. However, owning 5% or less of the securities of a publicly traded company is an exception.
Additionally, franchisees cannot directly or indirectly divert or attempt to divert any former business or customer of their Papa Ray's Pizza Restaurant to any competitive business. They are also prohibited from employing or soliciting employees of Aw or its affiliates, or inducing them to leave their employment. Lastly, franchisees are restricted from directly or indirectly soliciting or selling products or services to any former customer of their Papa Ray's Pizza Restaurant.
Aw notes that these non-competition restrictions may be modified by a court to ensure they are valid and enforceable. Aw also states that violating these covenants would cause immediate and irreparable injury, allowing Aw to seek an injunction against any prohibited conduct. Franchisees acknowledge that any violation may be presumed as unlawful use of Aw's Confidential Information and agree that any claims against Aw do not constitute a defense against the enforcement of these covenants. The franchisee is also responsible for covering all costs and expenses, including attorney's fees, incurred by Aw in enforcing these non-compete agreements.