Does the post-termination non-compete restriction for Buona apply to the location specified in the Approved Site Location Addendum?
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, the post-termination non-compete agreement does apply to the location specified in the Approved Site Location Addendum. Specifically, for two years after the franchise agreement expires or terminates, the franchisee (or any of its shareholders, officers, directors, members, managers, partners, and guarantors) cannot have any ownership interest in, maintain, operate, or be involved with a Competitive Business. This restriction applies within a 10-mile radius of the location specified in the Approved Site Location Addendum. It also applies to any other Buona Business location, whether owned by Buona itself or another franchisee, that exists as of the date the agreement expires or terminates.
This non-compete restriction prevents a former franchisee from directly competing with Buona within a defined geographic area after the franchise relationship ends. The restriction extends not only to the franchisee but also to affiliated individuals and entities, ensuring a broad scope of protection for Buona. The FDD clarifies that owning less than 2% of a publicly-traded security is an exception to this restriction.
The document states that franchisees possess general skills and abilities and have other opportunities to earn a living, so adhering to the non-compete will not deprive them of their personal goodwill or ability to earn a living. This statement is likely intended to address potential legal challenges to the enforceability of the non-compete agreement, as courts often scrutinize such restrictions to ensure they are reasonable and do not unduly restrict an individual's ability to work.
Prospective franchisees should carefully consider the implications of this non-compete agreement, especially if they have prior experience in the restaurant industry or plan to remain in the same geographic area after the franchise term. It is advisable to consult with legal counsel to fully understand the scope and enforceability of the non-compete provision in their specific circumstances.