Does the Buona franchise agreement allow the franchisee to grant a franchise to a Competitive Business after termination within the specified radius?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Buona Business, whether owned by Franchisor or any other Buona franchisee, 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 Manual 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 Manual) 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.
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a franchisee is restricted from granting a franchise to a competitive business within a specific radius for a certain period after the termination or expiration of the franchise agreement. Specifically, for two years following the termination or expiration of the agreement, the franchisee (or any of its shareholders, officers, directors, members, managers, partners, and guarantors) cannot grant a franchise to a Competitive Business within a ten-mile radius of the former Buona location or any other existing Buona location. This restriction applies regardless of the reason for termination.
This post-termination restriction is a standard practice in franchising to protect the brand and market share of the franchisor. It prevents a former franchisee from leveraging the knowledge and experience gained while operating a Buona franchise to directly compete with the system shortly after leaving. The agreement clarifies that this restriction does not prevent the franchisee from owning less than 2% of a publicly-traded security.
The Buona franchise agreement emphasizes that the franchisee possesses general skills and abilities and has other opportunities to earn a living. This statement is included to support the enforceability of the non-compete clause, suggesting that adhering to the restriction will not deprive them of their personal goodwill or ability to earn a living. Franchisees must also ensure that their shareholders, officers, directors, members, managers, partners, guarantors, supervisory and principal employees, including managers and assistant managers, sign a Nondisclosure and Noncompetition Agreement.
This agreement must be executed before they perform any work at the Franchised Business or have access to Buona's proprietary information. A copy of all signed agreements must be delivered to Buona within one week of their execution. This requirement extends the non-compete obligations beyond the franchisee to key personnel, ensuring broader protection for Buona's confidential information and business interests.