Do the non-competition covenants in the Beauty Bungalows Franchise Agreement apply to the Development Agreement after the franchise is terminated or expires, according to Section 8?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Agreement | Summary | |
|---|---|---|---|
| law). Any promises outside the Development Agreement, the Franchise Agreements, and this FDD may not be enforceable. However, nothing in the Franchise Agreement will have the effect of disclaiming any of the representations made in this FDD. | |||
| U | Dispute resolution by arbitration or mediation | Section 8 | The dispute resolution provisions of the Franchise Agreement apply to any disputes under the Development Agreement (subject to applicable state law) |
| V | Choice of forum | Section 8 | The choice of forum provisions of the Franchise Agreement apply to the Development Agreement (subject to applicable state law) |
| W | Choice of law | Section 8 | The choice of law provisions of the Franchise Agreement apply to the Development Agreement (subject to state law) |
| Provision | Section in ADA Agreement | Summary | |
| G | "Cause" defined - curable defaults | Not Applicable | Not Applicable |
| H | "Cause" defined - non-curable defaults | Section 6.1 | You fail to have open and operating the minimum number of Franchised Businesses specified in the Development Schedule by any Opening Deadline specified in the Development Schedule; any Franchise Agreement is terminated a result of default; or you breach or otherwise fail to comply fully with any other provision of the Development Agreement. |
| I | Franchisee's obligations on termination/nonrenewal | Section 6.2 | You will lose the right to continue to develop Franchised Businesses in your Development Area. |
| J | Assignment of contract by franchisor | Section 7 | Fully assignable and transferrable by us. |
| K | "Transfer" by franchisee - defined | Section 7 | Includes transfer of the Development Agreement, any interest in the Development Agreement, or, if you are a business entity, any interest in the entity. |
| L | Franchisor approval of transfer by franchisee | Section 7 | We have the right to approve or not approve all transfers in our sole discretion. |
| M | Conditions for franchisor approval of transfer | Section 7 | We have sole discretion in setting conditions for our approval of a transfer. |
| N | Franchisor's right of first refusal to acquire franchisee's Business. | Section 7 | We have the first right of refusal on all transfer, exercisable withing 30 days of receiving an executed copy of the contract of transfer. |
| O | Franchisor's option to purchase franchisee's Business | Not Applicable | Not applicable |
| P | Death or disability of franchisee | Not Applicable | We have the right approve or disapprove any transfer in our sole discretion. |
| Q | Non-competition covenants during the term of franchise | Section 8 | The non-competition covenants in your Franchise Agreement shall apply to your Development Agreement |
| R | Non-competition covenants after the franchise is terminated or expires | Section 8 | The non-competition covenants in your Franchise Agreement shall apply to |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 36–40)
What This Means (2025 FDD)
According to Beauty Bungalows's 2025 Franchise Disclosure Document, the non-competition covenants within the Franchise Agreement do extend to the Development Agreement, even after the franchise is terminated or expires, as outlined in Section 8. This means that if a franchisee's agreement is terminated, the restrictions on operating a competing business will still apply under the Development Agreement.
This is a significant point for prospective franchisees to consider. It implies that even after leaving the Beauty Bungalows system, either through choice or termination, the franchisee will be restricted from engaging in similar business activities. This restriction is designed to protect Beauty Bungalows's market share and proprietary information.
The FDD states that Section 8 of the Development Agreement addresses these non-competition terms. A potential franchisee should carefully review Section 8 of both the Franchise Agreement and the Development Agreement to fully understand the scope and duration of these restrictions, including geographic limitations and specific activities that are prohibited. Understanding these covenants is crucial for planning future business ventures after the franchise relationship ends.
It is also important to note that the enforceability of non-competition agreements can vary by state law. Therefore, a franchisee should seek legal counsel to understand how these covenants apply in their specific jurisdiction. This will help ensure they are aware of their rights and obligations both during and after the franchise term.