Does the Beef O Bradys non-compete agreement prevent me from being a shareholder in a Competitive Business?
Beef_O_Bradys Franchise · 2025 FDDAnswer from 2025 FDD Document
employment, association, service or ownership participation, I am prohibited from engaging in any Competitive Business, if the other business is located at any of Developer's Sites or within Developer's Development Area; within fifteen miles of any of Developer's Sites or Developer's Development Area, or, within fifteen miles of any other Family Sports Pub planned, in operation or under construction on the later of the effective date of the termination or expiration of the Area Development Agreement.
It is the intention of these provisions to preclude not only direct competition but also all forms of indirect competition, such as consultation for Competitive Businesses, service as an independent contractor for Competitive Businesses, or any assistance or transmission of information of any kind which would be of any material assistance to a competitor. Nothing herein will prevent me from owning for investment purposes up to an aggregate of 5% of the capital stock of any Competitive Business, so long as the Competitive Business is a publicly held corporation whose stock is listed and traded on a national or regional stock exchange, or through the National Association of Securities Dealers Automated Quotation System (NASDAQ), and so long as I or Developer do not control the company in question.
It is the intention of these provisions that any person or entity having any legal or beneficial interest in or traceable to, down or through me to be bound by the provisions of this covenant, including (without limitation) my spouse, brother, brother-in-law, sister, sister-in-law, parent, parent-in-law, child, son-in-law or daughter-in-law; any direct or indirect beneficiary;
Source: Item 23 — RECEIPTS. (FDD pages 66–330)
What This Means (2025 FDD)
According to Beef O Bradys' 2025 Franchise Disclosure Document, the non-compete agreement does place some restrictions on owning stock in a competitive business. During the term of the Franchise Agreement, neither you nor any of your owners (if you are a business entity) can have any direct or indirect interest, as a disclosed or beneficial owner, in a Competitive Business, except under franchise agreements with Beef O Bradys or its affiliates. Similarly, you cannot have any direct or indirect interest in any entity which is granted or is granting franchises or licenses to others to operate any Competitive Business, again, except for Family Sports Pubs under Franchise Agreements with Beef O Bradys or its Affiliates.
However, there is an exception to this restriction. The FDD states that you are not prevented from owning for investment purposes up to an aggregate of 5% of the capital stock of any Competitive Business. This is permitted only if the Competitive Business is a publicly held corporation whose stock is listed and traded on a national or regional stock exchange, or through the National Association of Securities Dealers Automated Quotation System (NASDAQ), and so long as neither you nor the franchisee controls the company in question.
In practical terms, this means that as a Beef O Bradys franchisee, you can invest in a small amount of publicly traded stock in a competing restaurant or sports pub chain without violating the non-compete agreement, provided you do not control that company. However, you are prohibited from owning a larger stake or being a disclosed or beneficial owner in a privately held competitor or a company that grants franchises to competitive businesses. This restriction is in place to protect Beef O Bradys' confidential information, encourage the free exchange of ideas within the franchise system, and ensure franchisees deal exclusively with Beef O Bradys.