Does the Bb.Q Chicken franchise agreement allow for reduced scope of non-compete covenants?
Bb_Q_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
or in conjunction with any person, persons or legal entity:
- 12.1.1 Divert or attempt to divert any business or client of the Franchised Business to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System.
- 12.1.2 Own, maintain, advise, help, invest in, make loans to, be employed by, engage in or have any interest in any restaurant or food service business other than the Franchised Business (including any business operated by you prior to entry into this Agreement), which business is of a character and concept similar to the Franchised Business, including a restaurant which offers and sells the same or similar food products (a "Competitive Business").
- 12.2 You covenant that, except as otherwise approved in writing by us, you shall not, for a continuous and uninterrupted period commencing upon the expiration or termination of this Agreement, or upon transfer, and continuing for two (2) years thereafter (and, in case of any violation of this covenant, for two (2) years after the violation ceases), either directly or indirectly, for yourself, or through, on behalf of or in conjunction with any person, persons, partnership or corporation, own, maintain, advise, help, invest in, make loans to, be employed by, engage in or have any interest in any Competitive Business which is located within twenty (20) miles of any bb.q Chicken Franchised Business in the System.
- 12.3 Subsections 12.1.3 and 12.2 of this Section shall not apply to ownership by you of less than a five percent (5%) beneficial interest in the outstanding equity securities of any corporation which is registered under the Securities Exchange Act of 1934, as amended.
- 12.4 The parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 62–283)
What This Means (2025 FDD)
According to Bb.Q Chicken's 2025 Franchise Disclosure Document, the franchise agreement contains non-compete covenants that apply both during the term of the agreement and after its termination or transfer. During the term, franchisees are restricted from engaging in any competitive business. Post-term, the non-compete lasts for two years and restricts involvement in a competitive business within 20 miles of any Bb.Q Chicken franchise. However, owning less than 5% of a publicly traded company is permitted. The agreement specifies that these covenants are considered independent and reasonable.
Bb.Q Chicken's franchise agreement includes a provision that addresses the potential unenforceability of non-compete clauses. If a court deems any portion of the non-compete unreasonable, the franchisee agrees to be bound by a lesser covenant that imposes the maximum duty permitted by law. This ensures that some form of restriction remains in place, tailored to what is legally enforceable in the specific jurisdiction.
Furthermore, the FDD includes addenda required by certain states, such as Indiana, which may further modify the non-compete provisions. For example, the Indiana addendum specifies that any post-term non-compete covenant must not extend beyond the franchisee's designated territory. These state-specific addenda highlight that the enforceability and scope of non-competes can vary based on local laws, and franchisees should be aware of the specific regulations in their state.
In summary, while the Bb.Q Chicken franchise agreement outlines specific non-compete restrictions, it also includes clauses that allow for adjustments to ensure enforceability and compliance with local laws. Prospective franchisees should carefully review these provisions and any state-specific addenda to understand the full scope and limitations of the non-compete obligations.