Does the post-termination non-competition clause for Azal Coffee apply to Family Members of the franchisee?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
r Term.
On the termination (including termination on transfer), expiration, or non-renewal of this Agreement, you and your shareholders, officers, directors, partners, members, managers, owners and investors, Family Members, and affiliates, must not, for a period of three (3) years commencing on the later of the effective date of termination, expiration, or non-renewal, or the date of any Court order enforcing this provision, directly or indirectly, engage in any activity in competition with us or our franchisees and licensees, including involvement, whether as an owner (except ownership of no more than one percent (1%) of a publicly traded entity), partner, director, officer, member, manager, employee, consultant, lender, representative or agent, or in any other capacity in 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; provided that, the restrictions in this Section will only apply within the "Geographic Areas" (defined in Section 13.4).
13.3 Other Restrictions.
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;
Source: Item 22 — CONTRACTS (FDD page 51)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, the post-termination non-competition clause does apply to Family Members of the franchisee. Specifically, during the term of the Franchise Agreement and for a period of three years after termination, expiration, non-renewal, or any other end of the Franchise Agreement, Family Members are restricted from certain activities.
These restrictions include not diverting business or customers from the Franchise Business or any other Azal Coffee store to a Competing Business, and not sponsoring, appointing, encouraging, influencing, or promoting others to operate a Competing Business. Additionally, Family Members are prohibited from employing any person or providing access to Confidential Information to anyone engaged in competition with Azal Coffee Stores. This includes involvement as an owner (with a minor exception of owning no more than 1% of publicly traded securities), partner, director, officer, employee, consultant, lender, representative, or agent in a Competing Business.
The term "Family Members" is defined broadly to include spouses, children, grandchildren, stepchildren, parents, siblings, spouse's parents, and spouse's siblings of the franchisee or any of their shareholders, officers, directors, partners, members, managers, owners, investors, and affiliates. This broad definition ensures that the non-compete obligations extend to a wide range of individuals closely related to the franchisee, preventing them from circumventing the restrictions.
This provision is designed to protect Azal Coffee's business interests and prevent unfair competition by those closely associated with the franchisee, ensuring that the knowledge and resources gained during the franchise operation are not used to benefit a competing business within the specified timeframe.