What is the duration of the covenant not to compete for an Aw franchisee after assignment, termination, or expiration of the franchise agreement?
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, a franchisee (and their Owners) is subject to a covenant not to compete for a period of two years after the assignment, termination, or expiration of the franchise agreement. This two-year period begins on the effective date of the assignment, termination, or expiration, or the date on which the franchisee begins complying with the covenants, whichever is later.
During this two-year period, the franchisee (and their Owners) is restricted 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. This restriction applies to involvement as an owner, investor, partner, director, officer, employee, consultant, representative, or agent, or in any other capacity. However, this does not include other Papa Ray's Pizza Restaurants the franchisee is operating under franchise agreements with Aw.
The non-compete area extends to within ten miles of the premises of the franchisee's former Papa Ray's Pizza Restaurant or within ten miles of any other Papa Ray's Pizza Restaurant. This prevents former franchisees from directly competing with existing Aw locations. The FDD also states that the non-compete agreement may be modified by a court to ensure it is valid and enforceable.
This type of post-term non-compete clause is common in franchising to protect the brand and market share of the franchisor. Prospective Aw franchisees should carefully consider the implications of this restriction, especially if they plan to remain in the restaurant industry after leaving the Aw system. They should also be aware that violating the non-compete agreement could result in legal action from Aw, including an injunction and payment of legal fees.