Are shareholders of an Azal Coffee franchisee subject to the non-compete restrictions?
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, shareholders are indeed subject to non-compete restrictions. Specifically, the agreement stipulates that the franchisee, along with their shareholders, officers, directors, partners, members, managers, owners, and investors, must adhere to certain restrictions during the term of the agreement and for three years after its termination, expiration, or non-renewal. This includes refraining from activities that could divert business from the Azal Coffee franchise or any other store to a competing business.
These restrictions extend to preventing these individuals from sponsoring, appointing, encouraging, or influencing others to operate a competing business. Furthermore, they are prohibited from employing anyone or providing access to confidential information to individuals involved in activities that compete with Azal Coffee. This encompasses any involvement as an owner (with a minor exception of owning no more than 1% of publicly traded securities), member, manager, partner, director, officer, employee, consultant, lender, representative, or agent in a competing business or any entity that franchises or licenses competing businesses.
The definition of "Family Members" also includes relationships to shareholders, officers, directors, partners, members, managers, owners and investors, and affiliates, meaning that these family members are also subject to certain restrictions. The non-compete obligations are designed to protect Azal Coffee's business interests and prevent franchisees and related parties from leveraging confidential information or relationships to unfairly compete with the franchise system.
This comprehensive approach ensures that a broad range of individuals connected to the Azal Coffee franchise are bound by the non-compete agreement, minimizing the risk of competition from those with inside knowledge or influence within the franchise network. Prospective franchisees should carefully review these restrictions and ensure they understand the implications for themselves, their business partners, and their families.