Does the post-termination non-compete restriction for a Buona franchisee apply to ownership of publicly-traded securities?

According to Buona's 2025 Franchise Disclosure Document, the post-termination non-compete agreement does not apply to the ownership of a small percentage of shares in a publicly-traded company. Specifically, the document states that owning two percent (2%) or less of a publicly traded franchisor will not be prohibited under the post-termination covenants. This means a former Buona franchisee can invest in a competitor's publicly-traded stock, as long as their ownership stake remains at or below this threshold.

This exception provides some flexibility for franchisees seeking investment opportunities after leaving the Buona system. However, it's important to note that this exception only applies to publicly traded companies. Any ownership interest in a privately held competitive business, regardless of size, would likely violate the non-compete agreement. The non-compete agreement lasts for two years following the expiration or termination of the Franchise Agreement.

It is also important to note that the non-compete agreement restricts a franchisee from having any ownership interest in, maintaining, operating, engaging in, serving as a director, officer, manager, employee, consultant or representative of, granting a franchise to, advising, helping, making loans to, leasing property to, or having 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 or (ii) the location of any other Franchised Business. 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.

Prospective franchisees should carefully consider the implications of the non-compete agreement and this exception, especially if they anticipate wanting to invest in businesses that might be considered competitive with Buona after their franchise agreement ends. It would be prudent to seek legal counsel to fully understand the scope and limitations of these restrictions.