Is a Big Apple Bagels franchisee's owner also subject to the covenant not to compete after termination or expiration?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
d. Covenant Not to Compete. Upon termination of this Agreement by Franchisor in accordance with its terms and conditions or by Franchisee without cause, or upon expiration of this Agreement, Franchisee and its owners agree that for a period of two (2) years, commencing on the effective date of termination or expiration or the date on which all persons restricted by this Paragraph begin to comply with this Paragraph, whichever is later, neither Franchisee nor its owners shall (i) have any direct or indirect ownership interest in any Competitive Business located or operating at the BAGELS Store location or within ten (10) miles of the BAGELS Store or within ten (10) miles of any other franchisee of Franchisor, or of any company-owned or Affiliate-owned BAGELS Store or My Favorite Muffin Store; (ii) have any direct or indirect ownership interest in any entity which has granted or during such two (2) year period grants franchises or licenses for the location or operation of Competitive Businesses at the BAGELS Store location or within ten (10) miles of the BAGELS Store or within ten (10) miles of any other franchisee of Franchisor, or of any company-owned or Affiliate-owned BAGELS Store or My Favorite Muffin Store; (iii) perform services as a director, officer, manager, employee, consultant, representative, agent, lender, lessor, or otherwise for any Competitive Business located or operating at the BAGELS Store location or within ten (10) miles of the BAGELS Store or within ten (10) miles of any other franchisee of Franchisor, or of any company-owned or Affiliate-owned BAGELS Store or My Favorite Muffin Store, or (iv) directly or indirectly, for Franchisee or for any other person or entity, alone or through or on behalf of others, own, engage in, be employed by, advise, assist, lease or sublease to, invest in, franchise, lend money to, sell or lease the assets of the BAGELS Store to, or have any financial or other interest in, a Competitive Business at the BAGELS Store location or within ten (10) miles of the BAGELS Store or ten (10) miles of any other franchisee of Franchisor, or of any company-owned or Affiliate-owned BAGELS Stores or My Favorite Muffin Store.
Source: Item 22 — CONTRACTS (FDD pages 86–87)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, the covenant not to compete applies not only to the franchisee but also to the franchisee's owners. Upon termination of the Franchise Agreement by Big Apple Bagels or by the franchisee without cause, or upon the expiration of the agreement, both the franchisee and their owners are subject to the non-compete terms.
Specifically, for a period of two years, commencing on the termination or expiration date (or the date of compliance, if later), neither the franchisee nor their owners can have a direct or indirect ownership interest in a Competitive Business. This restriction applies if the Competitive Business is located or operating at the Big Apple Bagels store location, within ten miles of that store, or within ten miles of any other Big Apple Bagels or My Favorite Muffin store.
Furthermore, the franchisee and their owners are prohibited from being involved with any entity that grants franchises or licenses for Competitive Businesses within the specified geographic areas during the two-year period. They are also barred from performing services for any Competitive Business in those areas as a director, officer, manager, employee, consultant, or in any other capacity. This comprehensive non-compete clause aims to protect Big Apple Bagels' market and brand integrity by preventing former franchisees and their owners from directly competing with the franchise system within a defined scope and timeframe.