After the termination of the Buona franchise agreement, for how long is the franchisee restricted from having an interest in a Competitive Business?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
us that you are entering into this Agreement with the intention of complying with its terms and conditions through the term of this Agreement and not for the purpose of resale of the developmental rights hereunder.
9. POST-TERMINATION COVENANTS
- 9.1 Unless otherwise specified, the term "Developer" as used in this Section 9 shall include each and every Owner of Developer.
- 9.2 Developer specifically acknowledges that, pursuant to this Agreement, Developer will have access to the Confidential Information. Accordingly, Developer covenants that Developer and its Owners shall not, for a period of two (2) years after the expiration or termination of this Agreement, regardless of the cause of termination, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, or entity:
- (a) own, maintain, operate, engage in, consult with or have any interest in (as disclosed or beneficial owner) any Competitive Business or any entity which is franchises, licenses or develops Competitive Businesses within the Development Area, or within a ten (10) mile radius of any existing Buona Restaurant, except under a validly existing Franchise Agreement with Franchisor. You acknowledge and agree that, after the date of this Agreement, other Buona Restaurants may open, thereby expanding the geographical area in which you will not be able to compete with us.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, both the franchisee and their owners are subject to a post-termination non-compete covenant. This covenant restricts them from engaging in any Competitive Business for a period of two years after the franchise agreement expires or is terminated, regardless of the reason for termination.
A "Competitive Business" is defined as any establishment that derives more than 10% of its gross sales from Italian beef, Italian sausage products, and other Italian specialties. The restriction applies within the Development Area or within a ten-mile radius of any existing Buona Restaurant. The FDD notes that as more Buona Restaurants open, the geographical area subject to this restriction may expand, further limiting where a former franchisee can operate a competitive business.
However, there is an exception: owning 2% or less of a publicly traded franchisor is not prohibited. This post-termination covenant ensures that former franchisees do not directly compete with Buona using the knowledge and confidential information they gained during their time as a franchisee. This type of restriction is common in franchising to protect the brand and its market share.