During the term of the Bambu franchise agreement, can a franchisee's officer be an employee of a Competitive Business?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — Receipts (FDD pages 52–209)
What This Means (2025 FDD)
According to Bambu's 2025 Franchise Disclosure Document, during the term of the franchise agreement, neither the franchisee nor any of the franchisee's officers, directors, shareholders, members, managers, or partners, nor any member of their immediate families, can perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for a Competitive Business, unless authorized by a separate agreement with Bambu. A Competitive Business is defined as 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.
This restriction prevents those affiliated with the Bambu franchise from actively working for a competing business during the term of the agreement. This is to protect Bambu's market position and prevent conflicts of interest. The definition of "Competitive Business" is broad, covering businesses that derive a significant portion of their revenue from similar products offered by Bambu.
However, the franchisee is not 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. This exception allows for passive investments in publicly traded companies that might be considered competitors, as long as the ownership stake remains minimal and non-controlling.
This non-compete clause is a standard practice in franchising to protect the franchisor's business model, trade secrets, and market share. Prospective franchisees should carefully consider the scope and limitations of this clause, as it restricts their ability to be involved with similar businesses during the franchise term. Franchisees should seek clarification from Bambu regarding any activities that may potentially violate this clause.