Is it presumed that a violation of the post-term covenant not to compete by an Aw franchisee involves the use of confidential information?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
- 17.3 Enforcement of Covenants Not to Compete. You acknowledge that violation of the covenants not to compete contained in this Agreement would result in immediate and irreparable injury to us for which no adequate remedy at law will be available. Accordingly, you hereby acknowledge that we may seek to obtain the entry of an injunction prohibiting any conduct by you or your Owners in violation of the terms of the covenants not to compete set forth in this Agreement. You expressly agree that it may conclusively be presumed that any violation of the terms of said covenants not to compete was accomplished by and through your unlawful use of our Confidential Information. Further, you expressly agree that the existence of any claims you may have against us, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by us of the covenants not to compete set forth in this Agreement. You further agree to pay all costs and expenses (including reasonable attorneys' and experts' fees) incurred by the us in connection with the enforcement of those covenants not to compete set forth in this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, it is presumed that a violation of the post-term covenant not to compete involves the use of confidential information. Specifically, the agreement states that any violation of the non-compete terms is presumed to be accomplished through the unlawful use of Aw's confidential information. This presumption is a significant point for prospective franchisees to consider.
This clause means that if Aw believes a franchisee has violated the post-term non-compete agreement, Aw does not have to prove the franchisee actually used confidential information. The burden shifts to the franchisee to prove they did not use confidential information in their competing business. This can be a difficult and costly legal hurdle for franchisees.
Furthermore, the agreement specifies that any claims a franchisee may have against Aw do not constitute a defense against the enforcement of the non-compete covenants. Aw is also entitled to recover all costs and expenses, including reasonable attorney and expert fees, incurred in enforcing these covenants. This further strengthens Aw's position in any legal dispute regarding the non-compete agreement, making it essential for franchisees to fully understand and comply with these terms to avoid potential legal action and financial liability.