Does the Bambu franchise agreement prevent a franchisee from attempting to divert business from Bambu's business to a Competitive Business?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
l continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.
21. RESTRICTIVE COVENANTS
- 21.1 Non-Competition During Term. Franchisee acknowledges that, in addition to the license of the Marks hereunder, Bambu has also licensed commercially valuable information which comprises and is a part of the Bambū system, including without limitation, operations, marketing, advertising and related information and materials and that the value of this information derives not only from the time, effort and money which went into its compilation, but from the usage of the same by all the franchisees of Bambu using the Marks and Bambū system. Therefore, other than the Bambū shoppe licensed herein or authorized by separate agreement with Bambu, neither Franchisee nor any of Franchisee's officers, directors, shareholders, members, managers or partners, nor any member of his or their immediate families, shall during the term of this Agreement:
- a. have any direct or indirect controlling interest as a disclosed or beneficial owner in a "Competitive Business" as defined below;
- b. perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for a Competitive Business; or
- c. divert or attempt to divert any business related to, or any customer or account of the Bambū shoppe, Bambu's business or any other Bambū franchisee's business, by direct inducement or otherwise, or divert or attempt to divert the employment of any employee of Bambu or another franchisee licensed by Bambu to use the Marks and Bambū system, to any Competitive Business by any direct inducement or otherwise.
The term "Competitive Business" as used in this Agreement shall mean any business operating, or granting franchises or licenses to others to operate, a retail or wholesale business deriving more than 10 percent of its gross receipts from preparation of or sale of teas, fruit dessert drinks, coffee, or other products now or in the future offered or sold by Bambū shoppes. Notwithstanding the foregoing, Franchisee shall not be prohibited from owning securities in a Competitive Business if such securities are listed on a stock exchange or traded on the over-the-counter market and represent 5 percent or less of that class of securities issued and outstanding.
Source: Item 23 — Receipts (FDD pages 52–209)
What This Means (2025 FDD)
According to Bambu's 2025 Franchise Disclosure Document, the franchise agreement includes restrictive covenants that address non-competition during the term of the agreement. Specifically, it states that the franchisee cannot divert or attempt to divert business related to the Bambu shoppe, Bambu's business, or any other Bambu franchisee's business to a Competitive Business. This restriction applies to the franchisee, their officers, directors, shareholders, members, managers, partners, and their immediate families.
This provision aims to protect the Bambu system by preventing franchisees from using the franchisor's confidential information, brand recognition, and customer relationships to benefit a competing business. The term "Competitive Business" is defined as any business deriving more than 10 percent of its gross receipts from the preparation or sale of teas, fruit dessert drinks, coffee, or other products offered or sold by Bambu shoppes. However, owning securities in a Competitive Business is permitted if the securities are listed on a stock exchange or traded over-the-counter and represent 5 percent or less of the outstanding securities.
For a prospective franchisee, this means that during the term of the Bambu franchise agreement, they are prohibited from actively engaging in or having a significant financial interest in any competing business that could draw customers or employees away from the Bambu system. This restriction is in place to ensure that franchisees remain committed to the success of their Bambu shoppe and do not exploit the Bambu system for personal gain through a competing venture. Franchisees should carefully consider this non-compete clause and its implications for any existing or future business interests they may have.