Are managers of an Azal Coffee franchisee subject to the non-compete restrictions?
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, managers are indeed subject to certain non-compete restrictions. Specifically, the franchisee, along with their shareholders, officers, directors, partners, members, managers, owners, and investors, Family Members, and affiliates, are restricted during the term of the Franchise Agreement and for three years after its termination, expiration, or non-renewal. These restrictions prevent them from diverting business, encouraging others to operate competing businesses, or employing individuals involved in competitive activities. This encompasses managers of the Azal Coffee franchise.
These restrictions include not diverting or attempting to divert any business or customer of the Franchise Business or any other Store to any Competing Business through direct or indirect inducements. They also cannot sponsor, appoint, encourage, influence, or promote friends, relatives, or associates to operate a Competing Business. Furthermore, they are prohibited from employing any person or furnishing or permitting access to confidential information to anyone engaged in competition with Azal Coffee. This includes involvement as an owner (with a minor exception for publicly traded securities), member, manager, partner, director, officer, employee, consultant, lender, representative, or agent in a Competing Business.
A "Competing Business" is defined as any business that competes with Azal Coffee Stores or is similar, including those selling similar coffee beverages, baked goods, food products, coffee beans, or coffee accessories. The geographic scope of these restrictions includes the Franchise Location and the area within twenty-five miles of it, as well as areas within twenty-five miles of any other Azal Coffee Store existing or in development when the franchisee ceases operation of the Competing Business.
For a prospective Azal Coffee franchisee, this means that not only are they bound by these non-compete restrictions, but so are their managers. This could impact hiring decisions and require careful management of personnel to ensure compliance. Franchisees need to ensure their managers understand these obligations to avoid potential breaches of the franchise agreement. The broad definition of "Family Members" also extends these restrictions to a wide range of individuals connected to the franchisee and their management team, adding another layer of complexity to compliance.