Following termination of a Bhc franchise, what condition must be met for the non-compete clause to apply regarding location of the competitive business?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
(a) For a period of two years after the date ("Termination Date") this Agreement is terminated, is canceled, or expires without renewal pursuant to section 5.2 of this Agreement, Franchisee agrees that neither Franchisee nor any Principal Equity Operator will (either directly or indirectly, for itself or themselves, or through, on behalf of, or in conjunction with, any person, persons, partnership, corporation or other entity) operate, manage, own, assist or hold an interest in (direct or indirect as an employee, officer, director, shareowner, partner or otherwise), or engage in, any competing business selling goods or offering services equivalent to BHC Products or the Franchised Business, within a radius
of 25 miles of Franchisee's Territory or any other authorized retail location selling BHC Products, without Franchisor's express prior written consent, which consent may be withheld in Franchisor's sole and absolute discretion. Following termination or expiration of this Agreement, Franchisee must always refrain from any use, direct or indirect, of any Proprietary Information or Trade Secrets.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, following the termination, cancellation, or expiration without renewal of the Franchise Agreement, a non-compete covenant applies. This covenant restricts the franchisee, or any Principal Equity Operator, from engaging in any competing business that sells goods or offers services equivalent to Bhc Products or the Franchised Business.
The condition regarding the location of the competitive business is that it must be within a 25-mile radius of the franchisee's territory or any other authorized retail location selling Bhc Products. This restriction is in effect for a period of two years from the termination date. However, the franchisee can operate a competing business within this radius if they obtain Bhc's express prior written consent, which Bhc may withhold at its discretion.
This non-compete clause aims to protect Bhc's market share and proprietary information. It prevents former franchisees from directly competing with existing Bhc locations shortly after leaving the franchise system. Franchisees should be aware of this restriction and consider its implications for their future business ventures after the franchise agreement ends. It is common in the franchise industry to have such non-compete clauses to protect the brand and other franchisees in the system.