Following termination of the Azal Coffee Franchise Agreement, where do the restrictions on engaging in a Competing Business apply?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
13.4 Definitions of Competing Business, Geographic Areas, and Family Members. The following definitions will apply to this Agreement:
- (a) "Competing Business" means any business that competes with the Stores and/or is the same or similar to an Azal Coffee Store, including but not limited to a business that sells the same or similar coffee beverages, baked goods, food products, coffee beans, or coffee accessories for dine-in, carry-out, catering, or delivery or other products that may be offered by Azal Coffee Stores now or in the future.
- (b) "Geographic Areas" means: (i) the Franchise Location; (ii) the area within twenty-five (25) miles of the Franchise Location; and (iii) the areas within twenty-five (25) miles of any other Azal Coffee Store existing or in development at the time you cease to operate the Competing Business.
- (c) "Family Members" means all individuals with any of the following relationships with you or any of your shareholders, officers, directors, partners, managers, members, owners and investors, and affiliates: (i) spouse; (ii) children; (iii) grandchildren; (iv) stepchildren; (v) parents; (vi) siblings; (vii) spouse's parents; and (viii) spouse's siblings.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, the restrictions on engaging in a Competing Business apply to specific geographic areas. These areas include the Franchise Location itself, the area within twenty-five (25) miles of the Franchise Location, and the areas within twenty-five (25) miles of any other Azal Coffee Store existing or in development at the time the franchisee ceases to operate the Competing Business. These restrictions are in place for a period of three years after the termination, expiration, or non-renewal of the Franchise Agreement.
The definition of a "Competing Business" is broad, encompassing any business that competes with Azal Coffee Stores or is similar to an Azal Coffee Store. This includes businesses that sell similar coffee beverages, baked goods, food products, coffee beans, or coffee accessories for dine-in, carry-out, catering, or delivery, as well as other products that Azal Coffee Stores may offer in the future. This broad definition means franchisees need to be very careful about any business ventures they consider after leaving the Azal Coffee system.
The restrictions apply not only to the franchisee but also to their shareholders, officers, directors, partners, members, managers, owners, investors, Family Members, and affiliates. "Family Members" includes spouses, children, grandchildren, stepchildren, parents, siblings, spouse's parents, and spouse's siblings. This extensive reach ensures that the franchisee cannot circumvent the non-compete agreement by involving close associates or family in a competing business.
Azal Coffee acknowledges that the post-term and geographical restrictions are designed to protect the reasonable competitive business interests of Azal Coffee and its franchisees and licensees. The agreement also states that if any part of these restrictions is found to be invalid, the Article imposing the restrictions will be considered as imposing the maximum restrictions allowed under applicable state law. Azal Coffee also retains the right to reduce the scope of these provisions at any time with immediate effect upon notice to the franchisee.