What constitutes a violation of the Noncompetition and Nondisclosure Agreement for a Buona franchisee?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
help, make loans to, lease property to, or have any interest in, directly or indirectly, a Competitive Business. However, this covenant shall not apply to any business operated by Franchisee under a franchise agreement with Franchisor or any of its Affiliates.
- 14.3 Post-Termination Covenants. Franchisee covenants that Franchisee and any of its shareholders, officers, directors, members, managers, partners and guarantors, either directly or indirectly, for itself or themselves or on behalf of, or in conjunction with, any other person or entity, regardless of the cause for termination shall not:
- (a) For a period of two (2) years following the expiration or termination of this Agreement, have any ownership interest in, maintain, operate, engage in, serve as a director, officer, manager, employee, consultant or representative of, grant a franchise to, advise, help, make loans to, lease property to, or have any interest in, directly or indirectly, a Competitive Business that is located within a radius of ten (10) miles of (i) the location specified in the Approved Site Location Addendum as described in Article I or (ii) the location of any other Franchised Business, whether owned by Franchisor or any other franchisee of Franchisor, in existence as of the date of expiration or termination of this Agreement. This restriction will not apply to the ownership of less than 2% of the outstanding shares of a publicly-traded security. Franchisee and its officers, directors, shareholders, managers, members, partners and guarantors expressly acknowledge that they possess skills and abilities of a general nature and have other opportunities for exploiting those skills. As a result, adherence to this restriction will not deprive them of their personal goodwill or ability to earn a living.
- 14.4 Nondisclosure and Noncompetition Agreement*.* Franchisee must have its shareholders, officers, directors, members, managers, partners, guarantors, supervisory and principal employees, including managers and assistant managers (as a condition to their employment), anyone Franchisee may choose to send to training, and anyone who has access to the Manuals or any of Franchisor's proprietary information or Confidential Information, execute Franchisor's standard Nondisclosure and Noncompetition Agreement (which is an exhibit to the Franchise Disclosure Document and as may be updated in the Manuals) before performing any work at the Franchised Business or otherwise having access to Franchisor's proprietary information. A copy of all the signed agreements shall be delivered to Franchisor within one (1) week of their execution. The failure of Franchisee to obtain execution of such Nondisclosure and Noncompetition Agreements as required by this Section shall constitute a material breach of this Agreement.
- 14.5 Competitive Business. For purposes of this Article XIII, a "Competitive Business" is defined as any retail establishment that derives more than ten percent (10%) of its gross sales from Italian beef and Italian sausage products and other Italian specialties or more than ten percent (10%) of its gross sales from ice cream.
- 14.6 Independent Covenants. The parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement. If all or any portion of a covenant in this Article XIV, is held unenforceable by a court or other tribunal having jurisdiction on a final decision, then Franchisee expressly agrees to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant was separately stated in and made a part of this Article XIV.
- 14.7 Right to Reduce Covenants.
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, several actions can constitute a violation of the Noncompetition and Nondisclosure Agreement. One key violation involves the franchisee, or their shareholders, officers, directors, members, managers, partners, and guarantors, engaging in a Competitive Business within a specific timeframe and radius after the franchise agreement expires or terminates. A Competitive Business is defined as any retail establishment that derives more than 10% of its gross sales from Italian beef, Italian sausage products, and other Italian specialties.
Specifically, for a period of two years following the expiration or termination of the agreement, the franchisee and related parties are prohibited from having any ownership interest in, maintaining, operating, engaging in, serving as a director, officer, manager, employee, consultant, or representative of, granting a franchise to, advising, helping, making loans to, or leasing property to a Competitive Business. This restriction applies if the Competitive Business is located within a 10-mile radius of the Buona franchise location or any other Buona Business. An exception exists for owning less than 2% of the outstanding shares of a publicly-traded security.
Additionally, it is a material breach of the Franchise Agreement if the franchisee fails to ensure that their shareholders, officers, directors, members, managers, partners, guarantors, supervisory and principal employees (including managers and assistant managers), anyone sent to training, and anyone with access to the Manual or Buona's proprietary or confidential information, execute Buona's standard Nondisclosure and Noncompetition Agreement. These signed agreements must be delivered to Buona within one week of their execution. Buona also has the right to seek injunctive relief against the franchisee for any violation of these covenants, along with all costs and reasonable attorneys' fees incurred in bringing such action.