Under what circumstances does the post-term covenant not to compete apply to 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 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;
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 becomes effective upon the assignment, termination, or expiration (without renewal) of the Franchise Agreement. This covenant applies to both the franchisee and their owners. The restrictions begin either on the effective date of the assignment, termination, or expiration, or on the date the franchisee starts complying with the covenants, whichever is later.
During the two-year period following the end of the franchise agreement, the franchisee and their owners are 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 roles such as owner, investor, partner, director, officer, employee, consultant, representative, or agent. The non-compete applies if the competing business is located within ten miles of the former Papa Ray's Pizza Restaurant location or within ten miles of any other Papa Ray's Pizza Restaurant.
Additionally, the franchisee and their owners are prohibited from being involved with any entity that grants franchises or licenses for a restaurant business offering similar products or services to Papa Ray's Pizza Restaurant. An exception exists for owning securities traded on a stock exchange or over-the-counter market, provided that the ownership represents 5% or less of that class of securities. The franchisee is also prohibited from diverting business or customers from their former Papa Ray's Pizza Restaurant to any competitive business, employing or soliciting employees of Aw or its affiliates, and soliciting or selling to former customers of their Papa Ray's Pizza Restaurant.