During the term, can a Buona franchisee have an ownership interest in a Competitive Business?
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.
- 14.4 Nondisclosure and Noncompetition Agreement*.* Franchisee must have its shareholders, officers, directors, members, managers, partners, guarantors, supervisory and principal employees, including managers and assistant managers (as a condition to their employment), anyone Franchisee may choose to send to training, and anyone who has access to the Manual or any of Franchisor's proprietary information or Confidential Information, execute Franchisor's standard Nondisclosure and Noncompetition Agreement (which is an exhibit to the Franchise Disclosure Document and as may be updated in the Manual) before performing any work at the Franchised Business or otherwise having access to Franchisor's proprietary information.
A copy of all the signed agreements shall be delivered to Franchisor within one (1) week of their execution.
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, the franchise agreement restricts a franchisee's involvement with competitive businesses for a period of two years after the agreement's expiration or termination. Specifically, the franchisee (including its shareholders, officers, directors, members, managers, partners, and guarantors) cannot have any ownership interest in, maintain, operate, engage in, or serve as a director, officer, manager, employee, consultant, or representative of a Competitive Business. This restriction also includes granting a franchise to, advising, helping, making loans to, or leasing property to a Competitive Business.
The restriction applies to Competitive Businesses located within a 10-mile radius of the franchisee's Buona location or any other Buona Business. However, an exception exists for ownership of less than 2% of the outstanding shares of a publicly-traded security. This means a Buona franchisee can own a small amount of stock in a publicly-traded competitor without violating the agreement.
Buona also requires its franchisees to ensure that their shareholders, officers, directors, members, managers, partners, guarantors, supervisory and principal employees, and anyone with access to confidential information sign a Nondisclosure and Noncompetition Agreement. This agreement aims to protect Buona's proprietary information and prevent unfair competition. Franchisees must provide copies of these signed agreements to Buona within one week of execution. These measures collectively ensure that franchisees and their key personnel remain committed to Buona and do not use their knowledge or resources to benefit competing businesses, especially after leaving the Buona system.