What is the geographic scope of the modifications to the Bombs Away franchise agreement described in this section?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
- (b) Restriction Post Term.
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.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
Based on the 2024 Bombs Away Franchise Disclosure Document, modifications to the covenants not to compete within the Guaranty apply to the franchisee's territory or the territory of any other Bombs Away business operating on the date of termination or transfer. This means that the restrictions on a guarantor's activities after the franchise agreement expires or is terminated extend not only to the specific territory of the franchisee they guaranteed but also to any area where another Bombs Away franchise is operating at the time of the agreement's end or transfer.
This has significant implications for potential guarantors, as it broadens the scope of their non-compete obligations. A guarantor, after the termination or transfer of the franchise, would be restricted from involvement with a competing business within the specified territories. The geographic restriction is tied to existing Bombs Away franchise locations at the time of termination or transfer, which could change over time as the Bombs Away system expands.
This clause protects Bombs Away's business interests by preventing former franchisees (and their guarantors) from leveraging knowledge gained during the franchise term to compete unfairly within the Bombs Away network, even in territories beyond their original location. The enforceability of such a clause can depend on state laws regarding non-compete agreements, and courts may modify the restriction if deemed unreasonably broad, as noted in section (c).