Is a franchisee permitted to operate any other businesses that directly or indirectly compete with the Burros Fries franchised business if they have a pre-existing business?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee specifically acknowledges that, pursuant to this Agreement, Franchisee will receive valuable specialized training, our Confidential Information and our System.
Franchisee agrees that, except as otherwise approved in writing by us, Franchisee shall not, during the term of this Agreement and for a period of two (2) years from the date of (i) a transfer permitted under this Agreement; (ii) the expiration or termination of this Agreement (regardless of the cause for termination); or (iii) a final order of a duly authorized arbitrator, panel of arbitrators, or a court of competent jurisdiction (after all appeals have been taken) with respect to any of the foregoing or with respect to the enforcement of this Section 19.C, either directly or indirectly for itself, or through, on behalf of, or in conjunction with, any person, persons, or legal entity, own, maintain, operate, engage in, be employed by, or have any interest in any business using any aspect of the System, the overall Burros & Fries business concept, with similar Products and/or Services within a ten (10) mile radius of the Accepted Location designated hereunder, or within a ten (10) mile radius of any other System franchise or company-owned business in existence or planned as of the time of termination or expiration of this Agreement as identified in the Franchise Disclosure Document in effect as of the date of expiration or termination of this Agreement.
The unenforceability of all or part of this covenant not to compete in any jurisdiction will not affect the enforceability of this covenant not to compete in any other jurisdictions, or the enforceability of the remainder of this Agreement. This covenant not to compete is given in part in specific consideration for access to trade secrets provided as a part of our training or ongoing support programs. In any jurisdiction in which the covenant contained in this Section 19 or any part of it is deemed not enforceable in whole or in part, Franchisee hereby grants us an option to purchase Franchisee's Business on expiration or termination of this Agreement. In such case, we may exercise this option by giving thirty (30) days' written
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to the 2024 Burros Fries Franchise Disclosure Document, franchisees are generally restricted from operating competing businesses. During the term of the Franchise Agreement and for two years after a transfer, expiration, or termination, a franchisee cannot own, maintain, operate, or have any interest in a business using the Burros & Fries business concept or similar products/services within a 10-mile radius of the franchised location or any other Burros Fries franchise or company-owned business. This restriction applies unless Burros Fries provides written approval otherwise.
This non-compete clause is in place to protect Burros Fries's confidential information, specialized training, and overall system. The agreement specifies that the unenforceability of the non-compete clause in one jurisdiction does not affect its enforceability in other jurisdictions. In areas where the non-compete clause is deemed unenforceable, Burros Fries has the option to purchase the franchisee's business upon expiration or termination of the agreement.
Burros Fries also retains rights not expressly granted to the franchisee, including the right to operate or authorize others to operate any business not substantially similar to a Burros Fries business within the territory, regardless of whether it uses Burros Fries's marks and system. They can also develop other concepts, including dual branding, and engage in transactions with other businesses, even those that compete with Burros Fries. Franchisees are required to participate in any brand conversions at their own expense as instructed by Burros Fries.
In summary, while the FDD does not explicitly address pre-existing businesses, it broadly restricts franchisees from engaging in competitive businesses during and for a period after the franchise agreement, emphasizing the need for written approval from Burros Fries for any potential competitive activities. A prospective franchisee with a pre-existing business that might be seen as competitive should seek clarification and written approval from Burros Fries to avoid potential conflicts.