Are guarantors bound by non-competition provisions after the termination of the Burros Fries Franchise Agreement?

According to the 2024 Burros Fries Franchise Disclosure Document, guarantors are bound by non-competition provisions after the termination of the Franchise Agreement. Specifically, the Individual Guaranty agreement states that guarantors are bound by the covenants of the agreement that survive termination, including non-competition provisions. This means that if a franchisee defaults and the guarantor has to step in, the guarantor is also subject to the same restrictions on operating a competing business as the franchisee would be.

This is a significant point for anyone considering acting as a guarantor for a Burros Fries franchise, especially if the franchisee is a corporation, partnership, or other entity. The guarantor should understand that they are not only guaranteeing the financial performance of the franchise but also agreeing to abide by the non-compete clause, even after the franchise agreement ends. This could limit their future business opportunities within a ten-mile radius of the Burros Fries location or any other Burros Fries business.

The non-competition covenant in the Burros Fries agreement states that the franchisee (and by extension, the guarantor) cannot own, maintain, operate, engage in, or have any financial interest in a business similar to Burros Fries within a ten-mile radius of the approved location or any other Burros Fries business. This restriction applies during the term of the agreement and for two years after the agreement's termination, transfer, or a final order from an arbitrator or court. This clause is designed to protect Burros Fries's market and confidential information.

It is important for potential guarantors to seek independent legal counsel to fully understand their responsibilities and liabilities under the Guaranty. They should carefully review the terms of the Franchise Agreement and the Individual Guaranty to assess the potential impact on their own business or employment opportunities. The FDD emphasizes that each guarantor should consult with their own legal counsel regarding their responsibilities under the Guaranty.