After the termination of the Buona franchise agreement, for how long are franchisees restricted from having 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.
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 having an ownership interest in a Competitive Business for a period of two years following the expiration or termination of the franchise agreement. This restriction applies to the franchisee and any of its shareholders, officers, directors, members, managers, partners, and guarantors.
Specifically, the franchisee is prohibited from having any ownership interest in, maintaining, operating, engaging in, serving as a director, officer, manager, employee, consultant, or representative of, granting a franchise to, advising, helping, making loans to, leasing property to, or having any interest in, directly or indirectly, a Competitive Business. This restriction is limited to a radius of ten miles from the Buona location specified in the Approved Site Location Addendum or any other Buona Business location in existence as of the date of expiration or termination.
However, there is an exception to this restriction. The ownership of less than 2% of the outstanding shares of a publicly-traded security is not subject to this restriction. This means a franchisee can invest in a competitor if their ownership stake is minimal and through publicly traded shares. Buona emphasizes that franchisees possess general skills and abilities and have other opportunities to earn a living, so this restriction should not deprive them of their personal goodwill or ability to earn a living.