During the term of the Bambu franchise agreement, can a franchisee's family member have a controlling interest in a Competitive Business?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
The term "immediate family" as used in this Article 21 shall mean and include any spouse, domestic partner, children, parents or siblings.
21.2 Post-Termination Covenant Not to Compete. Upon termination or expiration of this Agreement for any reason, Franchisee and its officers, directors, shareholders, members, managers and/or partners agree that, for a period of two years commencing on the effective date of termination or expiration, or the date on which Franchisee ceases to conduct business, whichever is later, neither Franchisee nor its officers, directors, shareholders, members, managers and/or partners shall have any direct or indirect interest (through a member of any immediate family of Franchisee or its owners or otherwise) as a disclosed or beneficial owner, investor, partner, director, officer, member, employee, consultant, representative or agent or in any other capacity in any Competitive Business, defined in Section 21.1 above, located or operating within a 10 mile radius of the Franchised Location, within 10 miles of any other franchised Bambū shoppe or, within 10 miles of any company or affiliate owned Bambū shoppe. If Franchisee or any of the affiliated parties breaches this Section, the two-year period shall start on the date that such person is enjoined from competing or stops competing, whichever is later. Franchisee and its officers, directors, shareholders,
members, managers and/or partners acknowledge that they possess skills and abilities of a general nature and have other opportunities for exploiting such skills.
Source: Item 23 — Receipts (FDD pages 52–209)
What This Means (2025 FDD)
According to Bambu's 2025 Franchise Disclosure Document, the franchise agreement restricts involvement in competitive businesses both during and after the franchise term. 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. However, franchisees are not prohibited from owning securities in a Competitive Business if those securities are listed on a stock exchange or traded over-the-counter and represent 5% or less of the outstanding securities.
The FDD defines "immediate family" as including a spouse, domestic partner, children, parents, or siblings. During the term of the agreement, the franchisee must own and control the Bambu shop. The FDD excerpts provided do not explicitly state whether a franchisee's family member can have a controlling interest in a Competitive Business during the term of the franchise agreement. However, the agreement does state that after termination of the agreement, neither the franchisee nor their immediate family can have a direct or indirect interest in a Competitive Business within a 10-mile radius of a Bambu shop.
Given the lack of explicit detail regarding family members' involvement during the franchise term, a prospective franchisee should seek clarification from Bambu regarding the restrictions placed on family members and their potential involvement in competitive businesses. Understanding the scope of these restrictions is crucial for franchisees with family members who may have existing or planned business ventures in the food and beverage industry. This information will help ensure full compliance with the franchise agreement and avoid potential conflicts of interest.