During the term of the Buona franchise agreement, can a franchisee have an ownership interest in 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, franchisees are restricted from holding interests in competitive businesses during the term of their franchise agreement. Buona includes this restriction to protect their confidential information and encourage open communication between the franchisee and franchisor.
Specifically, neither the franchisee nor their owners can directly or indirectly own, maintain, operate, engage in, consult with, or have any interest in a business offering products or services similar to those of a Buona Restaurant. This restriction also applies to entities that grant franchises or licenses for similar businesses. However, the ownership of five percent (5%) or less of a publicly traded franchisor is an exception to this rule.
This non-competition agreement ensures that franchisees remain dedicated to the Buona system and do not divert resources or knowledge to competing ventures. It also prevents franchisees from hiring employees away from Buona or its affiliates. This clause is a standard practice in franchising to protect the brand and maintain a level playing field among franchisees.