Does the Bombs Away post-term non-compete restriction apply after a transfer of the franchise?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
chising. This Section will survive the termination or expiration of the Franchise Agreement indefinitely.
3. Covenants Not to Compete.
- (a) Restriction In Term. During the term of the Franchise Agreement, 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.
- (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 Comp
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the post-term non-compete restriction applies after a transfer of the franchise. Specifically, the Guarantor, who signs a Guaranty and Non-Compete Agreement, is subject to certain restrictions. The non-compete agreement extends 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.
This means that if a Bombs Away franchisee transfers their franchise, the Guarantor is still bound by the non-compete agreement for two years following the transfer. During this period, the Guarantor cannot have any ownership interest in, lend money or provide financial assistance to, provide any services to, or be employed by any competitor operating in the franchisee's territory or the territory of any other Bombs Away business operating on the date of termination or transfer.
This restriction is designed to protect Bombs Away's business interests by preventing former franchisees or their guarantors from using their knowledge of the Bombs Away system to compete against the franchise after leaving the system. The agreement also specifies that if the Guarantor fails to comply with the obligations under this section during the restrictive period, the restrictive period will be extended an additional day for each day of noncompliance.