What geographic areas are covered by the post-term covenants for a Buns On Fire franchise?
Buns_On_Fire Franchise · 2025 FDDAnswer from 2025 FDD Document
For a period of two (2) years following termination, expiration, or non-renewal of this Agreement,
except where the termination occurs due to the fault or action of the Franchisor and not due to default of the Franchisee or any partner, if the Franchisee is a partnership, or any shareholder or member, if the Franchisee is a corporation or limited liability company, the Franchisee shall not, except with respect to the ownership or operation by Franchisee of additional Buns on Fire restaurants either directly or indirectly for himself or on the behalf of, or in conjunction with, any other person, persons, partnership, association or corporation, own, maintain, engage in, participate in, or have any interest in the operation of any Competitive Business, or which distributes, produces or sells the Products within (x), your Protected Territory as defined in Exhibit A; (y) the Protected Territory any other franchisee of Franchisor Business locations; or (z) the Protected Territory (as would be defined by the terms of Exhibit A) for any store operated by Franchisor. The restrictions of this Section 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 represents five percent (5%) or less of the number of shares of that class of securities issued and outstanding.
Source: Item 23 — RECEIPTS (FDD pages 49–200)
What This Means (2025 FDD)
According to the 2025 Buns On Fire Franchise Disclosure Document, the post-term covenants apply for two years after the termination, expiration, or non-renewal of the Franchise Agreement. These covenants restrict a franchisee from engaging in a Competitive Business, or a business that distributes, produces, or sells similar products.
The geographic scope of these restrictions includes (x) the franchisee's Protected Territory as defined in Exhibit A, (y) the Protected Territory of any other Buns On Fire franchisee, and (z) the Protected Territory (as would be defined by the terms of Exhibit A) for any store operated by Buns On Fire. However, these restrictions do not apply to owning less than five percent of a class of securities listed on a stock exchange or traded over-the-counter.
In practical terms, this means that after leaving the Buns On Fire system, a former franchisee cannot open a competing restaurant within their own previously assigned territory, within any other franchisee's territory, or within a territory that Buns On Fire itself might operate. This is a fairly standard practice in franchising to protect the brand and other franchisees from competition by former franchisees who have gained knowledge of the Buns On Fire system.