What non-competition covenant must the franchisee and its owners execute in favor of Browns Chicken and the transferee?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee and its owners must execute a general release, in form satisfactory to Brown, of any and all claims against Brown, its affiliates and their officers, directors, employees and agents; (8) Brown must approve the material terms and conditions of such transfer, including, without limitation, that the price and terms of payment are not so burdensome as to adversely affect the operation of the Store by the transferee; (9) if Franchisee finances any part of the sale price of the transferred interest, Franchisee and its owners agree that all obligations of the transferee under or pursuant to any promissory notes, agreements or security interests reserved by Franchisee or its owners in the assets of the Store or the Premises shall be subordinate to: (a) the obligations of the transferee to pay royalty fees, advertising contributions and other amounts due to Brown and its affiliates, and otherwise to comply with this Agreement or the franchise agreement executed by the transferee; and (b) the collateral security interest of Brown in the lease of the Premises; (10) Franchisee and its transferring owners must execute a non-competition covenant in favor of Brown and the transferee, agreeing that for a period of not less than five (5) years, commencing on the effective date of the transfer, Franchisee, its owners and members of the immediate family of each owner of Franchisee, will not hold any direct or indirect interest as a disclosed or beneficial owner, investor, partner,
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, when transferring ownership of a store, both the franchisee and their owners must sign a non-competition agreement benefiting Browns Chicken and the new owner (transferee). This agreement prevents the selling franchisee, their owners, and their immediate family members from holding any direct or indirect interest in a retail food service business that offers cooked chicken, pasta, or sandwiches. This restriction applies to being an owner, investor, or partner.
The non-compete period lasts for at least five years, starting from the date the transfer becomes effective. This restriction aims to protect Browns Chicken's market position and the investment of the incoming franchisee by preventing the previous owner from immediately opening a competing business nearby.
This type of non-compete agreement is a standard practice in franchising to maintain brand integrity and protect franchisees' investments. The specific terms, including the duration and geographic scope, can vary among different franchise systems. Prospective Browns Chicken franchisees should carefully review the non-compete agreement and understand its implications before signing the franchise agreement.