After termination of the Buona franchise agreement, can a former franchisee lease property to 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.
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a franchisee is restricted from certain activities after the termination or expiration of the franchise agreement. Specifically, for a period of two years, the franchisee (including its shareholders, officers, directors, members, managers, partners, and guarantors) cannot engage in activities related to a Competitive Business within a 10-mile radius of the former Buona location or any other existing Buona location.
This restriction includes a wide range of activities such as having any ownership interest in, maintaining, operating, or serving as a director, officer, manager, employee, consultant, or representative of a Competitive Business. Importantly, it also explicitly prohibits leasing property to a Competitive Business. The document clarifies that this restriction is in place regardless of the cause for termination.
This non-compete clause ensures that former franchisees do not directly compete with the Buona system shortly after leaving the franchise. The FDD states that this adherence to this restriction will not deprive them of their personal goodwill or ability to earn a living. However, there is an exception for owning less than 2% of the outstanding shares of a publicly-traded security.