What is the geographic scope of the non-compete agreement for a covenantor after termination of employment with a Baya Bar franchisee?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD page 56)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, a covenantor (typically an employee) who signs a non-compete agreement is restricted in their activities after their employment ends. Specifically, for a period of 24 months after termination, the covenantor cannot participate as an owner, partner, director, officer, employee, or consultant in any cafe or business serving similar products to the Baya Bar system. This restriction applies within a five-mile radius of the specific Baya Bar franchise location where they were employed, as well as any other Baya Bar location.
This non-compete clause aims to protect Baya Bar's goodwill and unique business qualities by preventing former employees from using confidential information or relationships gained during their employment to benefit a competing business. The geographic restriction ensures that former employees cannot directly compete with the Baya Bar franchise they left or any other Baya Bar outlet in close proximity.
Baya Bar acknowledges that the restrictions related to time, geographical area, and scope of activity are reasonable to protect the goodwill or other business interests of the franchisor. However, if a court deems the geographic scope to be unreasonable, it can be reduced to an enforceable level. Additionally, Baya Bar retains the right to reduce the scope of the non-compete agreement at its discretion by providing written notice to the covenantor.
Prospective franchisees should be aware of these restrictions and ensure that all employees who have access to confidential information sign the Confidentiality and Non-Compete Agreement. Franchisees are responsible for ensuring their employees comply with the terms of the agreement. This is a standard practice in franchising to protect the brand and prevent unfair competition.