What is the geographic scope of 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 ventu
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 franchisee (and their Owners) from engaging in similar restaurant businesses within a specific geographic area. This restriction applies for two years following the termination, expiration, or assignment of the franchise agreement, or from the date the franchisee begins complying with the covenants, whichever is later.
The geographic scope of the non-compete is defined as within ten miles of the former Aw restaurant location or within ten miles of any other Aw restaurant. This means that after leaving the Aw system, a former franchisee cannot own, invest in, or work for a competing restaurant that sells similar products or services within that 10-mile radius. The restriction also extends to involvement with any entity that grants franchises or licenses for similar restaurant businesses.
This post-term covenant aims to protect Aw's market and brand by preventing former franchisees from using their knowledge of the Aw system to directly compete in close proximity. However, the agreement does allow for ownership of securities traded on a stock exchange or over-the-counter market, provided that the ownership represents 5% or less of that class of securities. Franchisees should be aware of these limitations and consider them when planning their business activities after leaving the Aw franchise system.