factual

Is the post-termination non-competition clause for Azal Coffee limited to a specific geographic area?

Azal_Coffee Franchise · 2024 FDD

Answer 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; 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;

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 is limited to a specific geographic area. The agreement specifies that for a period of three years after termination, expiration, or non-renewal of the agreement, the franchisee is restricted from engaging in any competing business activities within defined "Geographic Areas".

The "Geographic Areas" are defined as (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 the franchisee ceases to operate the Competing Business. This means that after the franchise agreement ends, a former franchisee cannot operate a competing business within their original franchise location or within 25 miles of it, or within 25 miles of any other existing or developing Azal Coffee store.

This restriction also applies to the franchisee's shareholders, officers, directors, partners, members, managers, owners, investors, family members, and affiliates. Azal Coffee also retains the right to reduce the scope of these restrictions without the franchisee's consent, effective immediately upon notice. If any part of these restrictions is found to be invalid, the agreement will impose the maximum restrictions allowed under applicable state law.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.