Can Baya Bar enforce the non-competition agreements as a third party?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
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 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 42–43)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, the Confidentiality and Non-Compete Agreement involves the franchisee, Franchisor (Baya Bar Franchise Systems, LLC), and a third individual, referred to as the Covenantor. The franchisee is responsible for ensuring the Covenantor complies with the agreement. In the event of a breach, the franchisee is obligated to enforce the agreement. Baya Bar would be irreparably injured if the agreement is breached.
If a Covenantor violates the agreement, the franchisee is obligated to enforce the agreement and Baya Bar is entitled to a temporary or permanent injunction and a decree for specific performance, without needing to show actual harm or provide a bond. This indicates Baya Bar can ensure compliance with the non-compete agreement through the franchisee.
This setup is somewhat unusual in franchising, where non-compete agreements typically bind the franchisee directly. The use of a Covenantor suggests Baya Bar may be seeking to extend non-compete obligations to individuals associated with the franchisee, such as managers or family members involved in the business. A prospective franchisee should carefully review the Confidentiality and Non-Compete Agreement to understand who qualifies as a Covenantor and the full extent of their obligations.