After the Bombs Away agreement is terminated, does the non-compete apply to the territory of other Bombs Away businesses?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
For two years after the Franchise Agreement expires or is terminated for any reason (or, if applicable, for two years after a Transfer by Guarantor), Guarantor shall not directly or indirectly have any ownership interest in, lend money or provide financial assistance to, provide any services to, or be employed by, any Competitor operating in any of Franchisee's Territory or the territory of any other Bombs Away business operating on the date of termination or transfer, as applicable.
- (c) Interpretation.
Guarantor agrees that each of the foregoing covenants is independent of any other covenant or provision of this Guaranty or the Franchise Agreement.
If all or any portion of the covenants in this Section is held to be unenforceable or unreasonable by any court or arbitrator, then the parties intend that the court or arbitrator modify such restriction to the extent reasonably necessary to protect the legitimate business interests of Bombs Away Franchising.
Guarantor agrees that the existence of any claim it or Franchisee may have against Bombs Away Franchising shall not constitute a defense to the enforcement by Bombs Away Franchising of the covenants of this Section.
If Guarantor fails to comply with the obligations under this Section during the restrictive period, then the restrictive period will be extended an additional day for each day of noncompliance.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the non-compete agreement extends beyond the franchisee's territory to include the territory of other Bombs Away businesses. Specifically, for two years after the franchise agreement expires or is terminated, the franchisee (or guarantor) cannot have any involvement with a competing business operating in the franchisee's territory or the territory of any other Bombs Away business that was operating on the date of termination or transfer. This restriction applies regardless of the reason for termination.
This means that after leaving the Bombs Away franchise system, a former franchisee is restricted from engaging with any competitor within their original territory and also within the territories of other existing Bombs Away franchises. This provision is designed to protect Bombs Away's market share and prevent former franchisees from leveraging their knowledge of the Bombs Away system to benefit a competing business, potentially drawing customers away from existing Bombs Away locations.
The non-compete obligations are also applicable to the guarantor, who is typically an owner or key individual associated with the franchisee. This ensures that those with significant influence over the franchise's operations are also bound by the non-compete terms, preventing them from circumventing the restrictions by operating through another entity or individual. The FDD also states that if the guarantor fails to comply with the obligations under this section during the restrictive period, then the restrictive period will be extended an additional day for each day of noncompliance.
Prospective franchisees should carefully consider the scope and duration of this non-compete clause, as it could significantly limit their business opportunities after leaving the Bombs Away system. It is important to understand the geographic areas covered by the restriction and the types of activities that are prohibited to assess the potential impact on future ventures.