After termination of the Buona franchise agreement, can a former franchisee help a Competitive Business within the restricted radius?
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.
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a former franchisee is restricted from assisting a competitive business within a specific radius for a defined period. Specifically, for two years following the termination or expiration of the Franchise Agreement, the franchisee (including its shareholders, officers, directors, members, managers, partners, and guarantors) cannot 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, or lease property to a Competitive Business. This restriction applies to businesses located within a 10-mile radius of the former Buona location or any other Buona business existing at the time of termination.
This non-compete clause prevents former franchisees from leveraging their knowledge and experience gained while operating a Buona franchise to benefit a competing business in close proximity to existing Buona locations. The FDD clarifies that this restriction will not prevent them from earning a living, as they possess general skills and abilities applicable to other opportunities.
However, there is an exception: the restriction does not apply to the ownership of less than 2% of the outstanding shares of a publicly-traded security. This allows former franchisees to invest in publicly-traded companies that may be considered competitive businesses without violating the agreement. Franchisees must also ensure that their shareholders, officers, directors, members, managers, partners, guarantors, supervisory and principal employees, including managers and assistant managers sign Buona's standard Nondisclosure and Noncompetition Agreement.