What is the geographic limit of the restriction preventing Browns Chicken franchisees from engaging in a retail food service business featuring cooked chicken?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
order or other assurance satisfactory to
Brown of confidential treatment for the information required to be so disclosed; or (b) information, processes or techniques which are or become generally known in the restaurant industry, other than through disclosure by Franchisee.
15. EXCLUSIVE RELATIONSHIP.
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.
16. INSURANCE.
During the term of the Franchise, Franchisee shall maintain in force, under policies of insurance issued by carriers approved by Brown: (1) comprehensive public and product liability insurance and motor vehicle liability insurance (including but not limited to hired and non-owned coverage) against claims brought during or after the term of the Franchise for bodily and personal injury, death and property damage caused by or occurring in conjunction with the operation of the Store or otherwise in conjunction with the conduct of business by Franchisee pursuant to the Franchise, under one or more policies of insurance containing minimum liability protection of One Million Dollars ($1,000,000) combined single limit; (2) general casualty insurance, including fire and extended coverage, vandalism and malicious mischief insurance and plate glass and general theft insurance, for the replacement value of the Store and its contents; (3) Employment Practices Liability of no less than $500,000, (4) workmen's compensation insurance as required by law; and (5) business interruption insurance for a period adequate to re-establish normal business operations.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, there are two geographic restrictions related to competition. During the term of the franchise agreement, the franchisee (and their immediate family) is restricted from having any interest in a retail food service business that offers cooked chicken, pasta, or sandwiches, regardless of where it is located. This restriction applies worldwide. There is an exception for 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.
After the franchise agreement expires, is not renewed, or is terminated early, the franchisee is restricted from engaging in a retail food service business featuring cooked chicken, pasta, or sandwiches within five (5) miles of the Browns Chicken store or any other Browns Chicken store. This restriction lasts for eighteen (18) months.
These restrictions are fairly standard in the franchise industry to protect the brand and prevent franchisees from using the franchisor's knowledge to compete against the system, but the restriction during the term of the agreement is very broad geographically. A prospective franchisee should carefully consider these limitations, especially the restriction during the term of the agreement, and how they might impact other business opportunities or investments.