Does Article 5 of the Beard Papas Franchise Agreement affect the non-competition agreement during the franchise relationship?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee agrees that during the Term of this Agreement, Franchisee shall not engage in the following activities (the "Prohibited Activities"): (a) owning and/or having any legal or equitable interest whether, as an individual proprietor, owner, partner, member or shareholder of a Corporate Entity, or, in any similar capacity, in a Competitive Business other than, owning an interest of 3% or less in a publicly traded company that is a Competitive Business; (b) operating, managing, funding and/or performing services whether, as an employee, officer, director, manager, consultant, representative, agent, and/or creditor or, in any similar capacity, for or benefitting a Competitive Business; (c) diverting or attempting to divert any business or customers from Franchisor or, one of Franchisor's affiliates or franchisees; (d) inducing any customer or client of Franchisor, Franchisor's affiliates, franchisees of the System, or, of Franchisee, to any other person or business that is not a Beard Papa's Shop; and/or (e) engaging in any actions, inactions, and/or activities in violation of Articles 6.B. and/or 6.C. of this Agreement (all, individually and, collectively, referred to as the "Prohibited Activities"). Franchisee agrees that if Franchisee were to engage in the Prohibited Activities that such actions would be unfair, would constitute unfair competition and, would cause harm to Franchisor, the System and other Beard Papa's Shop franchisees. Franchisee agrees that the foregoing covenants and obligations shall also apply to Franchisee's Owners and Spouses and that Franchisee's Owners and Spouses shall each execute and deliver to Franchisor the Owner and Spouse Agreement and Guaranty in the form attached to this Agreement as Exhibit 1.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
Based on the 2025 Beard Papas Franchise Disclosure Document, Article 6.D outlines the restrictive covenants related to unfair competition and in-term non-competition obligations. During the term of the agreement, franchisees are prohibited from engaging in activities such as owning or having an interest in a competitive business (with a minor exception of owning 3% or less in a publicly traded company), operating or managing a competitive business, diverting customers from Beard Papas, or violating Articles 6.B and/or 6.C of the agreement. These activities are considered unfair competition and would cause harm to Beard Papas and its franchisees.
These restrictions also apply to the franchisee's owners and spouses, who are required to sign an Owner and Spouse Agreement and Guaranty. This agreement ensures that those closely associated with the franchisee are also bound by the non-competition terms, further protecting Beard Papas' interests. The FDD specifies that engaging in prohibited activities would be unfair and harmful to the franchisor, the system, and other Beard Papa's shop franchisees.
However, it is important to note that the enforceability of these non-compete clauses can vary by state. For example, the North Dakota Franchise Agreement Amendment states that covenants not to compete are generally considered unenforceable in the State of North Dakota. Therefore, prospective franchisees should be aware of the specific laws in their state regarding non-competition agreements and seek legal counsel to understand their rights and obligations under the Beard Papas Franchise Agreement.