Does the non-competition clause in the Azal Coffee Franchise Agreement prevent a franchisee from being a partner of a business that franchises a Competing Business during the term of the 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, the non-competition clause within the Franchise Agreement explicitly restricts a franchisee from being involved with a business that franchises a competing business during the term of the agreement. Specifically, the franchisee, along with their shareholders, officers, directors, partners, members, managers, owners, investors, family members, and affiliates, are prohibited from engaging in any activity that competes with Azal Coffee.
This restriction includes involvement in any business that franchises, licenses, or otherwise grants to others the right to operate a Competing Business. Involvement is broadly defined, encompassing roles such as owner (with a minor exception for owning no more than 1% of a publicly traded entity), partner, director, officer, member, manager, employee, consultant, lender, representative, or agent.
A "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 accessories. This restriction applies not only during the term of the Franchise Agreement but also extends for a period of three years after the termination, expiration, or non-renewal of the agreement, further limiting the franchisee's ability to engage with competing ventures post-franchise operation.