Does the non-compete agreement for Azal Coffee extend to members 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.
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 non-compete agreement extends to specific parties affiliated with the franchisee. Specifically, the agreement applies not only to the franchisee but also to their shareholders, officers, directors, members, managers, partners, owners, and investors, Family Members, and affiliates. This broad scope means that a wide range of individuals connected to the franchise are restricted from engaging in activities that compete with Azal Coffee.
During the term of the Franchise Agreement and for three years after its termination, expiration, or non-renewal, these parties are prohibited from directly or indirectly diverting business from Azal Coffee, sponsoring competing businesses, or employing individuals who are involved in competitive activities. The definition of "Competing Business" includes businesses that sell similar coffee beverages, baked goods, food products, coffee beans, or coffee accessories, whether for dine-in, carry-out, catering, or delivery. This restriction aims to protect Azal Coffee's market position and confidential information.
The non-compete extends to a wide range of people. "Family Members" include spouses, children, grandchildren, stepchildren, parents, siblings, spouse's parents, and spouse's siblings of the franchisee and their associated parties. This extensive definition ensures that even close relatives with potential influence or access to confidential information are covered by the non-compete obligations. The geographic scope of the non-compete includes the Franchise Location and areas within twenty-five (25) miles of the Franchise Location, as well as areas within twenty-five (25) miles of any other Azal Coffee Store existing or in development when the franchisee ceases operation.
If any of these parties violate the non-compete provisions, the restriction period will be extended until three years after they cease all activities that are in violation. This provision serves as a strong deterrent against competitive behavior and protects Azal Coffee's interests by ensuring that those with knowledge of its operations and access to its resources do not use that information to compete against the franchise. Prospective franchisees should carefully consider these restrictions and their implications for themselves and related parties before entering into a franchise agreement with Azal Coffee.