When does the two-year non-compete period begin for a terminated Big Apple Bagels franchisee?
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 two-year non-compete period begins either on the effective date of the franchise termination or expiration, or on the date when all individuals restricted by the non-compete clause begin to comply with its terms, whichever is later. This means that the non-compete clock doesn't necessarily start ticking the moment the franchise agreement ends. Instead, it begins when the franchisee and related parties actually cease the prohibited competitive activities.
This clause is triggered if the franchise agreement is terminated by Big Apple Bagels according to its terms, or by the franchisee without a valid cause, or upon the natural expiration of the agreement. The non-compete restrictions apply to the franchisee and their owners, preventing them from engaging in or having an interest in any competitive business within a specific geographic area. This area includes the Big Apple Bagels store location, or within ten miles of that store, or within ten miles of any other franchised, company-owned, or affiliate-owned Big Apple Bagels or My Favorite Muffin store.
The restrictions are broad, covering not only direct ownership but also indirect interests, such as being a director, officer, manager, employee, consultant, or lender for a competing business. It also prohibits involvement in entities that grant franchises or licenses for competitive businesses within the restricted area. This comprehensive approach aims to prevent franchisees from using their knowledge and experience gained from Big Apple Bagels to unfairly compete with the franchise system after their agreement ends.