During employment or association with a Baya Bar franchisee, can a covenantor participate in a business serving similar products?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
a. In order to protect the goodwill and unique qualities of the System, and in consideration for the disclosure to Covenantor of the Confidential Information, Covenantor further agrees and covenants that during Covenantor's employment or association with Franchisee, Covenantor shall not, for Covenantor 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 Baya Bar outlet 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.
b. In further consideration for the disclosure to Covenantor of the Confidential Information and to protect the goodwill and unique qualities of the System, Covenantor further agrees and covenants that, upon the termination of Covenantor's employment or association with Franchisee and continuing for twenty-four (24) months thereafter, Covenantor shall not, for Covenantor 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 Baya Bar System to any competitor, by direct or indirect inducement or otherwise, or
(ii) participate as an owner, partner, director, officer, employee, or consultant or serve in any other managerial, operational or supervisory capacity in any café or business serving products similar to the System within the within five (5) miles of Franchisee's Territory or any Baya Bar location.
c. The parties acknowledge and agree that each of the covenants contained herein are reasonable limitations as to time, geographical area, and scope of activity to be restrained and do not impose a greater restraint than is necessary to protect the goodwill or other business interests of Franchisor.
d. If the period of time or the geographic scope specified Section 2.b. above, should be adjudged unreasonable in any proceeding, then the period of time will be reduced by such number of months or the geographic scope will be reduced by the elimination of such portion thereof, or both, so that such restrictions may be enforced for such time and scope as are adjudged to be reasonable.
In addition, Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in this Agreement or any portion thereof, without Covenantor's or Franchisee's consent, effective immediately upon receipt by Covenantor of written notice thereof, and Covenantor agrees to forthwith comply with any covenant as so modified.
3. General.
a. Franchisee shall take full responsibility for ensuring that Covenantor acts as required by this Agreement.
- b. Covenantor agrees that in the event of a breach of this Agreement, Franchisor would be irreparably injured and be without an adequate remedy at law.
Therefore, in the event of such a breach, or threatened or attempted breach of any of the provisions hereof, Franchisee is obligated to enforce the provisions of this Agreement and shall be entitled, in addition to any other remedies that are made available to it at law or in equity, to a temporary and/or permanent injunction and a decree for the specific performance of the terms of this Agreement, without the necessity of showing actual or threatened harm and without being required to furnish a bond or other security.
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
According to the 2024 Baya Bar Franchise Disclosure Document, a covenantor (employee) is restricted from participating in any similar business during their employment or association with a Baya Bar franchisee. Specifically, the covenantor cannot be an owner, partner, director, officer, employee, consultant, or agent in any café or business serving similar products to Baya Bar. This restriction is designed to protect the goodwill and unique qualities of the Baya Bar system by preventing unfair competition and the dissemination of confidential information.
This non-compete obligation extends beyond simply refraining from diverting customers or business. It explicitly prohibits any active involvement in a competing business, regardless of the capacity. This is a fairly standard practice in franchising, as franchisors seek to protect their business model and market position. The agreement highlights the importance Baya Bar places on protecting its confidential information and maintaining a competitive edge.
Upon termination of employment or association with the franchisee, the covenantor is further restricted for 24 months. During this period, they cannot participate in a similar business within five miles of the franchisee's territory or any Baya Bar location. These restrictions are put in place to protect Baya Bar's market and prevent former employees from using their knowledge of the Baya Bar system to benefit a competitor. The FDD states that these covenants are considered reasonable in terms of time, geographical area, and scope to protect the franchisor's business interests.
Baya Bar also retains the right to modify the scope of these covenants. The franchisor can reduce the scope of any covenant without the covenantor's or franchisee's consent, effective immediately upon written notice to the covenantor. Franchisees are responsible for ensuring their employees comply with the terms of the agreement. In the event of a breach, Baya Bar is entitled to seek injunctive relief and specific performance, in addition to any other legal or equitable remedies, without needing to demonstrate actual harm or provide a bond.