Following termination or expiration of the Buona Area Development Agreement, what are the geographic limits of the non-competition covenant?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in ADA | Summary | |
|---|---|---|---|
| a. | Length of term of the agreement | Section 4 | Agreement expires on our acceptance and execution of the Franchise Agreement for the last franchise to be developed. |
| b. | Renewal or extension of the term | Not applicable | Not applicable |
| c. | Requirements for you to renew or extend | Not applicable | Not applicable |
| d. | Termination by you | Not applicable | Not applicable |
| e. | Termination by us without cause | Not applicable | Not applicable |
| f. | Termination by us with cause | Section 7 | We can terminate if you commit a listed violation. |
| g. | "Cause" defined - defaults which can be cured | Section 7 | Not applicable |
| h. | "Cause" defined - defaults which cannot be cured | Section 7 | Bankruptcy or similar proceeding, failure to comply with development schedule, breach of the agreement, unauthorized transfer, breach of any Franchise Agreement. |
| i. | Your obligations on termination/ non-renewal | Section 7.4 | No further right to develop; however, termination does not affect existing franchise agreements. |
| j. | Assignment of contract by us. | Section 8.1 | We have an unrestricted right to assign. |
| k. | "Transfer" by you – definition | Section 8.2 | Include transfer of any interest in the ADA or in the Developer. |
| l. | Our approval of transfer by you | Section 8.2 | You have no right to transfer any interest in the ADA or Developer. Any attempted transfer will be null and void. |
| m. Conditions for our approval of transfer | Not applicable | Not applicable | |
| n. | Our right of first refusal to acquire your business | Not applicable | Not applicable |
| o. | Our option to purchase your business | Not applicable | Not applicable |
| p. | Your death or disability | Not applicable | Not applicable |
| q. | Non-competition covenants during the term of the agreement | Section 6.4 | No involvement in a similar business or with a business granting franchises for similar businesses; subject to applicable state law. |
| Provision | Section in ADA | Summary | |
| ---- | -------------------------------------------------------- |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 52–60)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, the Area Development Agreement (ADA) includes non-competition covenants that apply both during the term of the agreement and after its termination or expiration. During the term of the ADA, Section 6.4 states that developers cannot be involved in a similar business or with a business granting franchises for similar businesses, subject to applicable state law.
However, the FDD does not specify geographic limitations of the non-compete covenant following the termination or expiration of the Area Development Agreement. The document only details the obligations upon termination, which include no further right to develop, but clarifies that termination does not affect existing franchise agreements.
A prospective Buona area developer should seek clarification from the franchisor regarding the geographic scope and duration of the non-competition covenant that would apply after the termination or expiration of the Area Development Agreement. Understanding these restrictions is crucial for assessing the long-term implications of the agreement and planning future business ventures.