What is the geographic scope of the post-termination non-compete for a Buona franchise, outside of the Development Area?
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, after the franchise agreement terminates, the franchisee is restricted from engaging in competitive business activities. Specifically, the franchisee cannot own, maintain, operate, engage in, consult with, or have any interest in a Competitive Business within a ten-mile radius of any existing Buona Restaurant. This restriction applies for two years, 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 the non-compete, focusing on businesses that directly compete with Buona's core offerings.
It's also important to note that the geographic area covered by the non-compete can expand as new Buona Restaurants open. This means that a franchisee's ability to operate a competitive business could be further limited over time as the Buona franchise system grows. The ownership of two percent or less of a publicly traded Franchisor will not be deemed to be prohibited by this paragraph.