What is the geographic scope of the post-termination non-compete covenant for a Bambu franchisee?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
The term "Competitive Business" as used in this Agreement means any business operating, or any business 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, Associate will not be prohibited by this Agreement 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.
Post-Termination Covenant Not to Compete.
Associate covenants and agrees that, for a period of two years after the earlier of (i) the effective date of termination or expiration of Associate's Affiliation with Franchisee or Bambu, or (ii) the effective date of termination or expiration of the Franchisee's Franchise Agreement, neither Associate, nor any member of Associate's immediate family, shall have any direct or indirect interest as a disclosed or a beneficial owner, investor, partner, director, officer, manager, employee, consultant, representative or agent or in any other capacity in any Competitive Business located or operating within a 10 mile radius of the Franchised Location, as defined i
Source: Item 23 — Receipts (FDD pages 52–209)
What This Means (2025 FDD)
According to the 2025 Bambu FDD, the standard post-termination non-compete agreement restricts an Associate from involvement with a Competitive Business within a 10-mile radius of the former Franchised Location. A "Competitive Business" is defined as any business deriving more than 10% of its gross receipts from the preparation or sale of teas, fruit dessert drinks, coffee, or other products currently or potentially offered by Bambu shops. This restriction applies for two years after the termination or expiration of the Associate's affiliation with the Franchisee or Bambu, or the termination or expiration of the Franchisee's Franchise Agreement, whichever comes first.
For a prospective Bambu franchisee, this means that after leaving the Bambu system, they (or their immediate family) cannot operate, invest in, or work for a competing business within a 10-mile radius of their former Bambu location for a period of two years. This could limit their ability to start a similar business or work for an existing competitor in the same geographic area. The definition of "Competitive Business" is broad, covering a range of products similar to those sold by Bambu, which could further restrict post-termination opportunities.
However, it is important to note that this restriction applies to the Associate, which the FDD does not explicitly define. It is also important to note that the FDD includes a specific modification for franchisees in Indiana. For these franchisees, the scope of the post-termination covenant not to compete in Section 21.2 is limited to the 10 mile radius of the Franchisee's former Franchised Location.
Prospective franchisees should carefully consider the implications of this non-compete agreement, especially if they plan to remain in the same geographic area after leaving the Bambu system. They should also seek legal advice to fully understand the enforceability and potential impact of the non-compete agreement in their specific state, as laws governing non-competes can vary.