Does the non-compete agreement for Azal Coffee extend to investors of the franchisee?
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, the non-compete agreement extends to the franchisee's investors. Specifically, the agreement states that the franchisee, along with their shareholders, officers, directors, partners, members, managers, owners, and investors, Family Members, and affiliates, are restricted from engaging in any competing business during the term of the Franchise Agreement and for three years after its termination, expiration, or non-renewal.
This restriction includes not diverting business or customers to a competing business, sponsoring or encouraging others to operate a competing business, or employing anyone involved in a competing business. The term "Competing Business" is defined as any business that competes with Azal Coffee Stores, including those selling similar coffee beverages, baked goods, food products, coffee beans, or coffee accessories.
An exception exists for owning no more than one percent (1%) of the publicly traded securities of an entity involved in a competing business. This means that while investors are generally restricted, they can hold a small investment in a publicly traded competitor without violating the non-compete agreement. The geographic scope of the non-compete covers the Franchise Location and areas within twenty-five (25) miles of the Franchise Location and any other Azal Coffee Store existing or in development.