If an Aw franchisee begins complying with the non-compete covenant after the termination date, does that change the start date of the non-compete period?
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 non-compete period's start date can be affected by when a franchisee begins complying with the covenant. Specifically, the two-year non-compete period starts on the effective date of assignment, termination, or expiration of the franchise agreement. However, if the franchisee begins complying with the non-compete obligations at a later date, the two-year period will commence from that later date of compliance.
This means that if an Aw franchisee does not immediately adhere to the non-compete terms upon termination or expiration, the clock on their non-compete obligation doesn't start ticking until they actually begin to comply. This could occur if there is a dispute about the termination itself, or if the franchisee needs time to wind down operations that would violate the non-compete.
For a prospective Aw franchisee, this clause offers a degree of flexibility. It allows for a delayed start to the non-compete period if immediate compliance isn't feasible or clear-cut. However, it's crucial to understand what constitutes 'complying with the covenants' to avoid unintentional violations and potential legal issues. Franchisees should seek legal counsel to fully understand their obligations and the implications of delaying compliance.
It is also important to note that the Aw franchise agreement states that these non-competition restrictions may be modified by a court to the extent necessary to make the non-competition agreements valid and enforceable against the franchisee.