During the term of the Buona franchise agreement, can a franchisee divert business to a Competitive Business?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
6.4 In-Term Non-Competition Agreement. You agree that we would be unable to protect the Confidential Information against unauthorized use or disclosure and would be unable to encourage a free exchange of ideas and information between you and us if you or your Owners were permitted to hold interests in any competitive businesses, as described below. You also acknowledge that we have entered into this Agreement with you in part in consideration of, and in reliance on, your agreement to deal exclusively with us. Therefore, during the term of this Agreement, neither you, nor any Owner, may, either directly or indirectly, for yourself or through, on behalf of, or in conjunction with, any person or legal entity, own, maintain, operate, engage in, consult with or have any interest in (as disclosed or beneficial owner) any business which offers products or services which are the same as, or similar to, those offered by a Buona Restaurant (other than through a franchise agreement with Franchisor), or any entity which is granting franchises or licenses for any business which offers products or services which are the same as, or similar to, those offered by a Buona Restaurant. (The ownership of five percent (5%) or less of a publicly traded Franchisor will not be deemed to be prohibited by this paragraph.) Further, during the term of this Agreement, you will not (1) divert customers or business from any Buona Restaurants to any other business or (2) hire any employees of ours or our affiliates.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, during the term of the franchise agreement, a franchisee is prohibited from diverting customers or business from any Buona Restaurants to any other business. This restriction is part of the in-term non-competition agreement that Buona requires.
This means that while operating a Buona franchise, franchisees cannot actively direct customers away from their Buona restaurant or other Buona locations to a competing business. This restriction is in place to protect Buona's confidential information and encourage a free exchange of ideas and information between the franchisee and Buona. The agreement also prevents franchisees or their owners from holding interests in competitive businesses.
This non-compete clause ensures that franchisees remain fully committed to the success of their Buona franchise and do not use their access to Buona's resources and information to benefit a competing business. This is a standard practice in franchising to maintain brand integrity and prevent conflicts of interest. The FDD specifies that during the term of the agreement, franchisees will not divert customers or hire employees of Buona or its affiliates.