What is the condition regarding the execution of a non-competition covenant by the franchisee and its owners for Browns Chicken?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
In connection with this obligation, Franchisee shall notify Brown of the name and address of each affiliate, officer, director, partner, supervisory employee and owner of Franchisee and shall update such information whenever necessary.
Such notification shall contain and have annexed thereto a copy of a confidentiality and noncompetition agreement in a form satisfactory to Brown, executed by the individual at the time he or she acquires an interest in or becomes associated with Franchisee in which such individual consents to be bound by the restrictive covenants contained in said agreement and to Brown's and Franchisee's enforcement of such covenants.
The obligations of Franchisee pursuant to this Section 14 shall survive the termination or expiration of this Agreement.
Franchisee acknowledges and agrees that Brown would be unable to protect the Confidential Information against unauthorized use and disclosure and would be unable to encourage a free exchange of ideas and information among BROWN'S Stores if owners of BROWN'S Stores and members of their immediate families were permitted to hold interests in or perform services for competitive businesses. Brown has entered into this Agreement with Franchisee on the express condition that with respect to the operation of a retail food service business which offers cooked chicken, pasta, or sandwiches. Franchisee (and its owners and members of their respective immediate families) will deal exclusively with Brown. Franchisee therefore agrees that during the term of this Agreement, except for the Store and other BROWN'S Stores operated under franchise agreements with Brown: (1) neither Franchisee, nor any shareholder or partner of Franchisee (in the event Franchisee, is a corporation or partnership), nor any member of the immediate family of Franchisee or any shareholder or partner of Franchisee, shall have any direct or indirect interest as a disclosed or beneficial owner of any retail food service business wherever located, that offers cooked chicken, pasta or sandwiches, or any direct or indirect interest in any entity which is granting franchises or licenses to others to operate retail food service businesses that offer cooked chicken, pasta or sandwiches; and (2) neither Franchisee nor any partner or shareholder of Franchisee shall perform services as a director, officer, manager, employee, consultant, lessor, lender, representative, agent or otherwise for any retail food service business wherever located, that offers cooked chicken, pasta or sandwiches; provided that the restrictions of this Section 15 shall not be applicable to the ownership of shares of a class of securities listed on a stock exchange or traded on the over-the- counter market that represent one percent (1%) or less of the number of shares of that class of securities issued and outstanding.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, the franchisee is obligated to ensure that each affiliate, officer, director, partner, supervisory employee, and owner of the franchisee signs a confidentiality and non-competition agreement. This agreement must be in a form satisfactory to Browns Chicken. The agreement must be executed when the individual acquires an interest in or becomes associated with the franchisee. By signing, the individual consents to be bound by the restrictive covenants in the agreement and to Browns Chicken's and the franchisee's enforcement of these covenants.
Browns Chicken requires this notification to ensure that all individuals associated with the franchisee are aware of and agree to maintain the confidentiality of Browns Chicken's proprietary information and adhere to the non-competition terms. This is a standard practice in franchising to protect the brand's trade secrets and market position. The franchisee must keep Browns Chicken updated on any changes to the individuals associated with the franchise to ensure ongoing compliance with this requirement.
The obligations for the franchisee to maintain confidentiality and non-competition extend beyond the termination or expiration of the Franchise Agreement. This means that even after the franchise relationship ends, the franchisee and its associated individuals remain bound by the terms of the confidentiality and non-competition agreement. This continuing obligation is designed to protect Browns Chicken's interests and prevent unfair competition from former franchisees or their associates who may have gained access to confidential information during their time with the franchise.
Furthermore, during the term of the Franchise Agreement, Browns Chicken requires that the franchisee (including its owners and their immediate families) deal exclusively with Browns Chicken regarding the operation of a retail food service business offering cooked chicken, pasta, or sandwiches. This means that neither the franchisee nor their immediate family members can have any direct or indirect interest in any competitive retail food service business, except for owning a small percentage (1% or less) of publicly traded securities. This exclusive relationship clause ensures the franchisee's full commitment to the Browns Chicken system and prevents conflicts of interest.