During the term of the Azal Coffee agreement, what are franchisees and their affiliates prohibited from doing regarding competitive businesses?
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, franchisees and certain related parties face specific restrictions regarding competitive businesses both during the term of the Franchise Agreement and for a period of three years after its termination, expiration, or non-renewal. These restrictions apply to the Franchisee Parties, which include their shareholders, officers, directors, members, managers, partners, owners, investors, Family Members, and affiliates. Family Members include spouses, children, grandchildren, stepchildren, parents, siblings, spouse's parents, and spouse's siblings.
During the term of the agreement and the subsequent three-year period, these individuals and entities are prohibited from diverting or attempting to divert business or customers from the Azal Coffee franchise or any other store to a Competing Business. This includes direct or indirect inducements. They are also barred from sponsoring, appointing, encouraging, influencing, or promoting friends, relatives, or associates to operate a Competing Business.
Furthermore, franchisees cannot employ any person or provide access to confidential information to anyone engaged in competition with Azal Coffee. This extends to involvement as an owner (with a minor exception of owning no more than 1% of publicly traded securities), partner, director, officer, member, manager, employee, consultant, lender, representative, or agent of a business involved in a Competing Business. 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 coffee accessories for dine-in, carry-out, catering, or delivery.
These restrictions are designed to protect Azal Coffee's market position and confidential information. If a franchisee violates these restrictions after the agreement ends, the prohibition period will be extended until three years after the cessation of the violating activities. Azal Coffee also retains the right to reduce the scope of these restrictions at any time with immediate effect upon notice to the franchisee.