Are there any exceptions to the non-competition covenant during the term of the Buona franchise agreement?
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.
The failure of Franchisee to obtain execution of such Nondisclosure and Noncompetition Agreements as required by this Section shall constitute a material breach of this Agreement.
- 14.5 Competitive Business. For purposes of this Article XIII, a "Competitive Business" is defined as any retail establishment that derives more than ten percent (10%) of its gross sales from Italian beef and Italian sausage products and other Italian specialties.
- 14.6 Independent Covenants. The parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement. If all or any portion of a covenant in this Article XIV, is held unenforceable by a court or other tribunal having jurisdiction on a final decision, then Franchisee expressly agrees to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant was separately stated in and made a part of this Article XIV.
- 14.7 Right to Reduce Covenants. Franchisee understands and acknowledges that Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in this Article XIV, or
Source: Item 23 — RECEIPTS (FDD pages 78–356)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, franchisees and related parties are restricted from engaging in competitive business activities during and after the franchise term. During the term of the franchise agreement, a franchisee is restricted to selling Buona products only from the approved location. Without prior written consent from Buona, a franchisee cannot use other distribution channels like the internet, catalog sales, or telemarketing to make sales outside the approved location.
After the agreement expires or terminates, the franchisee and its shareholders, officers, directors, members, managers, partners, and guarantors are restricted for two years. They cannot have any ownership interest in, maintain, operate, or be involved with a Competitive Business within a 10-mile radius of the Buona location or any other Buona business. A Competitive Business is defined as any retail establishment that derives more than 10% of its gross sales from Italian beef, Italian sausage products, and other Italian specialties.
An exception to this restriction exists for ownership of less than 2% of the outstanding shares of a publicly-traded security. 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. Failure to obtain these agreements constitutes a material breach of the franchise agreement. Buona also retains the right to reduce the scope of any covenant set forth in Article XIV at its sole discretion.