Are family members of an Azal Coffee franchisee subject to the non-compete restrictions?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
r Term.
On the termination (including termination on transfer), expiration, or non-renewal of this Agreement, you and your shareholders, officers, directors, partners, members, managers, owners and investors, Family Members, and affiliates, must not, for a period of three (3) years commencing on the later of the effective date of termination, expiration, or non-renewal, or the date of any Court order enforcing this provision, directly or indirectly, engage in any activity in competition with us or our franchisees and licensees, including involvement, whether as an owner (except ownership of no more than one percent (1%) of a publicly traded entity), partner, director, officer, member, manager, employee, consultant, lender, representative or agent, or in any other capacity in any business that is involved, in whole or in part, in a Competing Business or in any business or entity that franchises, licenses or otherwise grants to others the right to operate a Competing Business; provided that, the restrictions in this Section will only apply within the "Geographic Areas" (defined in Section 13.4).
13.3 Other Restrictions.
You and your shareholders, officers, directors, partners, members, managers, owners and investors, Family Members, and affiliates, must not, during the term of this Agreement and for a period of three (3) years after termination, expiration, or non-renewal of this Agreement, directly or indirectly: (a) divert or attempt to divert any business or customer of the Franchise Business or any other Store to any Competing Business by direct or indirect inducements or otherwise; (b) sponsor, appoint or encourage or influence or promote friends, relatives or associates to operate a Competing Business;
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, family members are indeed subject to non-compete restrictions. The FDD specifies that "Family Members" are included in the restrictions outlined in the agreement. This means that during the term of the agreement and for three years after termination, expiration, or non-renewal, family members cannot engage in activities that would divert business from Azal Coffee or operate a competing business.
The definition of "Family Members" is broad, encompassing a range of relationships including spouses, children, grandchildren, stepchildren, parents, siblings, spouse's parents, and spouse's siblings. This extensive definition ensures that a wide net is cast to prevent potential conflicts of interest and protect Azal Coffee's business interests. The restrictions apply to these family members whether they are acting directly or indirectly.
This non-compete obligation means that family members are restricted from being involved in any capacity with a competing business, including as an owner (with a minor exception for owning no more than 1% of publicly traded securities), member, manager, partner, director, officer, employee, consultant, lender, representative, or agent. This is a significant consideration for prospective franchisees, as it impacts the career and business options of their close relatives. Franchisees should discuss these restrictions with their family members to ensure everyone understands the implications before entering into the agreement.
It is also important to note that these restrictions extend for a period of three years after the termination, expiration, or non-renewal of the franchise agreement. This extended period ensures that former franchisees and their families do not immediately leverage their knowledge and experience to compete with Azal Coffee. Franchisees should carefully consider the geographic scope of these restrictions as well, as they typically include the franchise location and areas within a certain radius of other Azal Coffee stores.