Does the Aw covenant not to compete prevent a former franchisee from being an employee of a competing restaurant?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
f 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.
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 restricts a former franchisee (and their Owners) from having any direct or indirect interest as an employee in any restaurant business selling products or services substantially similar to a Papa Ray's Pizza Restaurant concept. This restriction applies for two years after the agreement's termination, expiration, or assignment, or the date the franchisee begins complying with the covenants, whichever is later.
This non-compete clause is limited geographically to within ten miles of the former franchisee's Papa Ray's Pizza Restaurant or within ten miles of any other Papa Ray's Pizza Restaurant. This means that a former Aw franchisee is prohibited from being an employee of a competing restaurant within that specified radius.
The FDD also states that the franchisee acknowledges that violating the covenants not to compete would result in immediate and irreparable injury to Aw, for which no adequate remedy at law will be available. Therefore, Aw may seek an injunction prohibiting any conduct by the franchisee or their Owners that violates the terms of the covenants not to compete. The franchisee also agrees to pay all costs and expenses, including reasonable attorneys' and experts' fees, incurred by Aw in connection with enforcing these covenants.