Can a franchisee of Azal Coffee be involved in a business that franchises a Competing Business during the term of the Franchise Agreement?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
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; or (c) employ any person or furnish of permit access to our Confidential Information to any person who is engaged or has arranged to become engaged in any activity in competition with Azal Coffees, including involvement, either as an owner (except no more than one percent (1%) of the publicly traded securities of an entity), member, manager, partner, director, officer, employee, consultant, lender, representative or agent, or in any other capacity, of 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.
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, franchisees and related parties are restricted from involvement with competing businesses during the term of the Franchise Agreement and for three years after its termination, expiration, or non-renewal. This restriction extends to shareholders, officers, directors, members, managers, partners, owners, investors, family members, and affiliates of the franchisee.
The term "Competing Business" includes any business that competes with Azal Coffee Stores or is similar, such as those selling similar coffee beverages, baked goods, food products, coffee beans, or coffee accessories. The restriction includes involvement as an owner (with a minor exception), member, manager, partner, director, officer, employee, consultant, lender, representative, or agent. The exception to ownership is holding no more than one percent (1%) of the publicly traded securities of an entity.
Specifically, franchisees are prohibited from being involved with any business or entity that franchises, licenses, or otherwise grants to others the right to operate a Competing Business. This restriction aims to prevent franchisees from using confidential information or the Azal Coffee system to benefit a competing brand.
Violation of these restrictions after the agreement ends can extend the prohibition period until three years after the franchisee ceases all violating activities. This comprehensive non-compete clause is designed to protect Azal Coffee's market position and proprietary information.