What geographic restrictions are placed on a Buona Developer regarding competitive businesses after the termination of the franchise agreement?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
9. POST-TERMINATION COVENANTS
- 9.1 Unless otherwise specified, the term "Developer" as used in this Section 9 shall include each and every Owner of Developer.
- 9.2 Developer specifically acknowledges that, pursuant to this Agreement, Developer will have access to the Confidential Information. Accordingly, Developer covenants that Developer and its Owners shall not, for a period of two (2) years after the expiration or termination of this Agreement, regardless of the cause of termination, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, or entity:
- (a) own, maintain, operate, engage in, consult with or have any interest in (as disclosed or beneficial owner) any Competitive Business or any entity which is franchises, licenses or develops Competitive Businesses within the Development Area, or within a ten (10) mile radius of any existing Franchised Restaurant, except under a validly existing Franchise Agreement with Franchisor. You acknowledge and agree that, after the date of this Agreement, other Franchised Restaurants may open, thereby expanding the geographical area in which you will not be able to compete with us. For purposes of this Section 9, a "Competitive Business" is defined as any retail establishment that derives more than ten percent (10%) of its gross sales from Italian beef and Italian sausage products and other Italian specialties or any retail establishment that derives more than ten percent (10%) of its gross sales from ice cream;
- (b) directly or indirectly divert or attempt to divert any former business or customer of a Franchised Restaurant to any competitive business; and
- (c) employ or seek to employ any person employed by us or our affiliate or by any other Franchised Restaurant franchisee, or otherwise directly or indirectly induce or seek to induce such person to leave his or her employment, subject to applicable law;
The ownership of two percent (2%) or less of a publicly traded Franchisor will not be deemed to be prohibited by this paragraph.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a Developer faces certain restrictions regarding competitive businesses after the franchise agreement terminates. For a period of two years following the termination or expiration of the agreement, the Developer and their Owners are prohibited from owning, maintaining, operating, engaging in, consulting with, or having any interest in a Competitive Business within the Development Area or within a ten-mile radius of any existing Buona Restaurant. This restriction applies regardless of the reason for termination.
A "Competitive Business" is defined as any retail establishment that derives more than ten percent of its gross sales from Italian beef and Italian sausage products and other Italian specialties or any retail establishment that derives more than ten percent of its gross sales from ice cream. This definition is important because it clarifies the scope of businesses that the Developer is restricted from being involved with. The FDD also notes that as new Buona Restaurants open, the geographical area in which the Developer cannot compete may expand, meaning the non-compete area isn't fixed.
These post-termination covenants are designed to protect Buona's confidential information and customer base. The restrictions prevent a former Developer from using the knowledge and experience gained during their time with Buona to directly compete with the franchise. It is fairly standard practice in franchising to have post-term non-compete restrictions, but the specific terms (duration, geographic scope, and definition of competitive business) can vary significantly between franchise systems. A prospective Buona franchisee should carefully consider the implications of these restrictions before entering into a franchise agreement, especially if they have plans to operate a similar business in the future.