What is the maximum geographic area of a non-compete covenant required by Bombs Away after termination or non-renewal?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
erm. During the term of this Agreement, neither Franchisee, any Owner, nor any spouse of an Owner (the "Restricted Parties") shall 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.
- (b) Restriction Post Term. For two years after this Agreement expires or is terminated for any reason (or, if applicable, for two years after a Transfer), no Restricted Party shall 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. The parties agree that each of the foregoing covenants is independent of any other covenant or provision of this 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. Franchisee agrees that the existence of any claim it 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 a Restricted Party 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.
- 13.3 General Manager and Key Employees. If requested by Bombs Away Franchising, Franchisee will cause its general manager and other key employees to sign Bombs Away Franchising's then-current form of confidentiality and non-compete agreement (unless prohibited by applicable law).
ARTICLE 14. DEFAULT AND TERMINATION
14.1 Termination by Franchisee. Franchisee may terminate this Agreement only if Bombs Away Franchising violates a material provision of this Agreement and fails to cure or to make substantial progress toward curing the violation within 30 days after receiving written notice from Franchisee detailing the alleged default. Termination by Franchisee is effective 10 days after Bombs Away Franchising receives written notice of termination.
14.2 Termination by Bombs Away Franchising.
- (a) Subject to 10-Day Cure Period. Bombs Away Franchising may terminate this Agreement if Franchisee does not make any payment to Bombs Away Franchising when due, or if Franchisee does not have sufficient funds in its account when Bombs Away Franchising attempts an electronic funds withdrawal, and Franchisee fails to cure such non-payment within 10 days after Bombs Away Franchising gives notice to Franchisee of such breach.
- (b) Subject to 30-Day Cure Period. If Franchisee breaches this Agreement in any manner not described in subsection (a) or (c), and Franchisee fails to cure such breach to Bombs Away Franchising's satisfaction within 30 days after Bombs Away Franchising gives notice to Franchisee of such breach, then Bombs Away Franchising may terminate this Agreement.
- (c) Without Cure Period. Bombs Away Franchising may terminate this Agreement by giving notice to Franchisee, without opportunity to cure, if any of the following occur:
- (i) Franchisee misrepresented or omitted material facts when applying to be a franchisee, or breaches any representation in this Agreement;
- (ii) Franchisee knowingly submits any false report or knowingly provides any other false information to Bombs Away Franchising;
- (iii) a receiver or trustee for the Business or all or substantially all of Franchisee's property is appointed by any court, or Franchisee makes a general assignment for the benefit of Franchisee's creditors, or Franchisee is unable to pay its debts as they become due, or a levy or execution is made against the Business, or an attachment or lien remains on the Business for 30 days unless the attachment or lien is being duly contested in good faith by Franchisee, or a petition in bankruptcy is filed by Franchisee, or such a petition is filed against or consented to by Franchisee and the petition is not dismissed within 45 days, or Franchisee is adjudicated as bankrupt;
- (iv) Franchisee fails to open for business by the date specified on the Summary Page;
- (v) Franchisee or any Owner commits a material violation of Section 7.2 (compliance with laws) or Section 13.1 (confidentiality), violates Section 13.2 (non-compete) or Article 15 (transfer), or commits any other violation of this Agreement which by its nature cannot be cured;
- (vi) Franchisee abandons or ceases operation of the Business for more than 15 consecutive days;
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, after the franchise agreement expires or is terminated, a franchisee is restricted from engaging with any competitor for two years. This restriction applies within the franchisee's territory and also extends to the territory of any other Bombs Away business operating at the time of termination or transfer.
This means that a former Bombs Away franchisee cannot own, invest in, work for, or provide services to a competing business within their original territory or any other Bombs Away territory. This non-compete obligation is in place to protect Bombs Away's market share and brand integrity by preventing franchisees from using their knowledge of the Bombs Away system to benefit a competitor.
The agreement also stipulates that if any part of the non-compete covenant is deemed unenforceable by a court or arbitrator, the intention is for the restriction to be modified only to the extent necessary to protect Bombs Away's legitimate business interests. Furthermore, any failure to comply with the non-compete terms will result in an extension of the restrictive period by one day for each day of noncompliance.
Bombs Away may also require the franchisee's general manager and other key employees to sign a confidentiality and non-compete agreement, unless prohibited by law. This ensures that those with significant knowledge of the Bombs Away business are also bound by similar restrictions, further safeguarding Bombs Away's interests.