What family members of the Browns Chicken franchisee's owners are subject to the non-competition covenant?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
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 non-competition covenant extends to the immediate family members of the franchisee and the franchisee's owners. Specifically, the FDD states that Browns Chicken has entered into the agreement with the franchisee on the condition that the franchisee and their immediate family members will deal exclusively with Browns Chicken regarding the operation of a retail food service business that offers cooked chicken, pasta, or sandwiches.
This means that during the term of the franchise agreement, neither the franchisee, nor any shareholder or partner of the franchisee (if the franchisee is a corporation or partnership), nor any member of the immediate family of the franchisee or any shareholder or partner of the franchisee, can have any direct or indirect interest in any retail food service business that offers cooked chicken, pasta, or sandwiches. This restriction applies regardless of the location of the competitive business. They are also prohibited from having 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.
Furthermore, neither the franchisee nor any partner or shareholder of the franchisee can perform services as a director, officer, manager, employee, consultant, lessor, lender, representative, agent, or otherwise for any retail food service business that offers cooked chicken, pasta, or sandwiches, regardless of location. There is a minor exception for owning shares of a publicly traded company, where the ownership represents one percent (1%) or less of the outstanding shares.
This exclusive relationship clause is designed to protect Browns Chicken's confidential information and encourage a free exchange of ideas among franchisees. It prevents owners and their families from using the franchisor's knowledge and resources to benefit competing businesses. Prospective franchisees should carefully consider these restrictions and ensure that they and their immediate family members are willing to commit to this level of exclusivity before investing in a Browns Chicken franchise.