For how long does the non-competition covenant last after a Browns Chicken franchise transfer?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
If the Franchise expires, is not renewed or is terminated prior to its expiration for any reason, Franchisee agrees that for a period of eighteen (18) months commencing on the effective
date of expiration or termination of the Franchise, or the date on which Franchisee ceases to conduct the business conducted pursuant to this Agreement, whichever is later, it will not:
- (1) engage, directly or indirectly, as an owner (except of publicly-traded securities), partner, director, officer, employee, consultant, lessor, lender, representative or agent, or in any other capacity in a retail food service business featuring cooked chicken, pasta, or sandwiches, and which is located within five (5) miles of the Store or any BROWN's Store, or in any entity which is granting franchises or licenses for retail food service businesses featuring cooked chicken, pasta or sandwiches; or
- (2) lease, let or sublease any real property or personal property to any person, corporation, partnership or any other entity engaged directly or indirectly in any retail food service business featuring cooked chicken, pasta or sandwiches located within five (5) miles of the Store or any BROWN's Store.
To the extent that this Paragraph E of Section 21 is deemed unenforceable by virtue of its scope in terms of area or length of time or activity restrained, but may be made enforceable by reduction of any or all thereof, Franchisee and Brown agree that the same shall be enforced to the fullest extent permissible under the laws and public policies applied in the jurisdiction in which enforcement is sought.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
The 2025 Browns Chicken Franchise Disclosure Document (FDD) outlines restrictions on competition if a franchise expires, is not renewed, or is terminated. Specifically, the franchisee agrees not to engage in a similar retail food service business featuring cooked chicken, pasta, or sandwiches within a five-mile radius of the Browns Chicken store for a period of eighteen months. This restriction begins either on the effective date of the franchise's expiration or termination, or on the date the franchisee ceases to conduct business under the agreement, whichever is later.
This non-compete clause applies to the franchisee acting as an owner, partner, director, officer, employee, consultant, lessor, lender, representative, or agent in a competing business. It also prevents the franchisee from leasing property to any entity engaged in a similar retail food service within the specified radius. The agreement clarifies that if any part of this restriction is deemed unenforceable due to its scope, the parties agree that it should be enforced to the fullest extent permissible by law.
It is important to note that this non-compete agreement applies upon the expiration or termination of the franchise agreement and is not explicitly mentioned as being triggered by a simple transfer of ownership. However, the FDD states that the selling franchisee and its owners may remain liable for the performance of the new franchisee for a duration not to exceed the remainder of the term of the transferor's Franchise Agreement, as determined by Browns Chicken. A prospective franchisee should clarify with Browns Chicken whether a non-compete agreement would be required in the event of a transfer.