Is the continuation of a Buona franchisee's rights to their Protected Area dependent on achieving a certain sales volume or market penetration?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
Continuation of your rights to the Protected Area is not dependent upon achieving a certain sales volume, market penetration or other or market penetration or other contingency. We cannot alter your territorial rights.
Area Development Agreement
Under the Area Development Agreement, an exclusive territory is designated within which it is expected you will develop the multiple Buona Businesses during the term of the Area Development Agreement ("Development Area"). The Development Area will be described in Exhibit A to the Area Development Agreement. The size of the Development Area will vary and will depend on the number of restaurants you intend to open, our analysis of the market potential and your financial and operational abilities.
As long you are in compliance with the Development Schedule and otherwise in compliance with the Area Development Agreement, during the term of the Area Development Agreement, we will not establish, nor license anyone other than Developer the right to establish any Buona Business in the Development Area. We (and any affiliate) reserve the right:
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- To distribute products and services which are part of the System through any alternative distribution channels including, but not limited to, supermarkets and other retail facilities, wholesale sale, catalogs, direct marketing, the Internet or similar electronic media, using the Marks;
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- To establish businesses which are franchised, licensed or owned by us or any affiliate at any locations we deem appropriate or distribute products or services which are similar to the products and services offered under the System under trade names, trademarks, service marks, trade dress or other commercial symbols other than the Marks;
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- To acquire or be acquired by another franchisor establishing businesses identical or similar to the Buona Business, even if the other business operates, franchises, and/or licenses competitive businesses anywhere, including the Development;
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- To implement and maintain multi-area marketing programs at any time, including internet and regional or national accounts. We reserve the right to establish mandatory policies and procedures for these multi-area marketing programs;
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- to engage in any other business activities not expressly prohibited by the Area Development Agreement.
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- Your continued exclusive rights to the Development Area are dependent upon you meeting all of the deadlines in the Development Schedule.
Source: Item 12 — TERRITORY (FDD pages 46–48)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a franchisee's rights to their Protected Area are generally not dependent on achieving a specific sales volume or market penetration. This means that as long as the franchisee remains in compliance with the Franchise Agreement, Buona will not revoke or alter their territorial rights based on sales performance. This provides a level of security for the franchisee, as their exclusive territory is not at risk due to fluctuating sales figures. However, this applies to a single brand Buona Business.
However, if a franchisee enters into an Area Development Agreement to develop multiple Buona Businesses, the continuation of their exclusive rights to the Development Area is dependent on meeting all deadlines in the Development Schedule. Failure to adhere to the Development Schedule can result in Buona terminating the Area Development Agreement, reducing the number of restaurants the developer has the right to establish, or exercising other legal remedies.
It is important to note that even with a Protected Area, Buona retains certain rights, including the right to use the Marks and System outside the Protected Area, establish businesses at Non-Traditional Sites within the Protected Area, sell products through other outlets, and utilize alternative channels of distribution like the internet. Additionally, Buona can implement multi-area marketing programs that may impact a franchisee's territory. These retained rights could potentially introduce competition within or near a franchisee's Protected Area, regardless of their sales performance.
For franchisees considering an Area Development Agreement, it is crucial to understand the Development Schedule and ensure they have the resources and capabilities to meet the required deadlines. Prospective franchisees should also carefully evaluate the potential impact of Buona's retained rights on their business and market within the Protected Area.