Does the Buona franchise agreement allow the franchisee to lease property 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.
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 leasing property to a Competitive Business within a specific radius after the termination or expiration of the franchise agreement. Specifically, for a period of 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 lease property to a Competitive Business.
This restriction applies within a 10-mile radius of either the location specified in the Approved Site Location Addendum or the location of any other Buona Business, whether owned by Buona or another franchisee, that existed as of the termination or expiration date. This clause aims to prevent former franchisees from directly supporting competing businesses in close proximity to existing Buona locations, thereby protecting Buona's market share and brand integrity.
However, there is an exception: the restriction does not apply to the ownership of less than 2% of the outstanding shares of a publicly-traded security. This acknowledges that franchisees may have minor, passive investments in publicly-traded companies that happen to be in a competitive business. The FDD also states that the franchisee acknowledges they possess general skills and abilities and have other opportunities for exploiting those skills, so the restriction will not deprive them of their personal goodwill or ability to earn a living.