Besides the franchisee, who else is bound by the post-term covenant not to compete for an Aw franchise?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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,
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 applies not only to the franchisee but also to their Owners. This means that individuals with an ownership stake in the franchise business are also restricted from engaging in competitive activities after the franchise agreement is terminated, expires, or is assigned.
The covenant restricts the franchisee and their Owners from having any direct or indirect interest in a restaurant business selling similar products or services to Aw's Papa Ray's Pizza concept. This includes being an owner, investor, partner, director, officer, employee, consultant, representative, or agent in any such competing business. The restriction applies within a 10-mile radius of the former Aw location or any other Aw location.
This non-compete obligation extends for two years, starting from the effective date of the termination, expiration, or assignment, or the date they begin complying with the covenants, whichever is later. The FDD also specifies that Aw may seek an injunction to prevent any conduct violating these non-compete terms and that any violation may be presumed to involve the unlawful use of Aw's confidential information. The franchisee and their Owners are also responsible for covering all costs and expenses, including attorney's fees, that Aw incurs while enforcing these covenants.
Prospective franchisees should carefully consider the implications of this post-term non-compete agreement, especially if they or their Owners have existing business interests or plan to engage in similar ventures after leaving the Aw system. It is important to understand the scope and duration of the restrictions and to seek legal advice if necessary.