After the Baya Bar agreement expires, does the non-compete apply if there is a transfer of the franchise?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
- 19.5.2 Upon the expiration or earlier termination of this Agreement or upon a Transfer and continuing for twenty-four (24) months thereafter, Franchisee and Principals, if any, shall not, either directly or indirectly, for themselves or through, on behalf of or in conjunction with any person or entity (i) divert, or attempt to divert, any business or customer of the Franchised Business or of other franchisees in the System to any competitor, by direct or indirect inducement or otherwise; or (ii) participate as an owner, partner, director, officer, employee, consultant or agent or serve in any other capacity in any café or business serving products similar to the System within five (5) miles of the Territory or any Baya Barlocation; or (iii) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System or (iv) in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Baya Bar franchisees.
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, the non-compete agreement remains in effect even after the expiration or termination of the franchise agreement, or upon a transfer of the franchise. Specifically, for a period of 24 months following the expiration, termination, or transfer, the franchisee and its principals are restricted from engaging in activities that could harm Baya Bar's business.
This restriction includes not diverting business or customers to competitors, participating in similar businesses, or interfering with the business of Baya Bar or its franchisees. The geographic scope of this non-compete is limited to within five miles of the Territory or any Baya Bar location.
This means that if a Baya Bar franchise is transferred to a new owner, the previous owner remains bound by the non-compete obligations for two years after the transfer. This ensures that the former franchisee cannot immediately open a competing business nearby and leverage their existing knowledge and relationships to the detriment of the Baya Bar system. This survival clause protects Baya Bar's interests and the interests of its other franchisees by preventing unfair competition from former franchisees who have transferred their business.