Does the Buona franchise agreement allow the franchisee to grant a franchise to a Competitive Business during the term?
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 the 2025 Buona Franchise Disclosure Document, a franchisee is restricted from granting a franchise to a competitive business during and after the franchise term. Specifically, for a period of two years after the agreement expires or is terminated, the franchisee (including its shareholders, officers, directors, members, managers, partners, and guarantors) cannot grant a franchise to a Competitive Business within a 10-mile radius of the Buona location or any other Buona Business.
This restriction is in place regardless of the reason for termination and applies whether the franchisee acts directly or indirectly, alone or with another entity. The FDD clarifies that owning less than 2% of shares in a publicly-traded security is an exception to this rule.
Buona requires its franchisees, along with their shareholders, officers, directors, members, managers, partners, guarantors, supervisory and principal employees, to sign a Nondisclosure and Noncompetition Agreement. This agreement must be executed before they start working at the Buona Business or gain access to proprietary information. The franchisee must provide copies of these signed agreements to Buona within one week of their execution. This ensures that all relevant parties are legally bound to protect Buona's interests and trade secrets.
These measures are typical in franchising to protect the brand and prevent franchisees from using the franchisor's knowledge to benefit a competing business, especially in close proximity to existing Buona locations.