Does the non-compete apply to company-owned Burros Fries businesses?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to the 2024 Burros Fries Franchise Disclosure Document, the non-compete clause does apply to company-owned Burros Fries businesses. Specifically, the franchise agreement states that franchisees are restricted from operating a similar business within a 10-mile radius of any existing or planned Burros Fries franchise or company-owned business. This restriction applies both during the term of the agreement and for two years after its termination, transfer, or a final order from an arbitrator or court.
This non-compete obligation ensures that franchisees cannot leverage the training, confidential information, and the Burros Fries system they gained to compete with existing Burros Fries outlets, whether franchised or company-owned. The clause aims to protect the brand's market presence and prevent unfair competition within a defined geographical area. The FDD specifies that this restriction is in place to protect Burros Fries' trade secrets provided during training and ongoing support programs.
For a prospective franchisee, this means that upon leaving the Burros Fries system, they cannot open a competing business near their former location or near any other Burros Fries location, including those owned and operated by the company. This restriction is common in franchising to protect the brand and other franchisees in the system. The franchisee also agrees to ensure their staff acts as required by the agreement.
It's important to note that the enforceability of the non-compete clause can vary by jurisdiction. If any part of the covenant is deemed unenforceable in a particular jurisdiction, Burros Fries has the option to purchase the franchisee's business upon the agreement's expiration or termination. This highlights the importance of understanding the specific legal implications of the non-compete agreement in the franchisee's location.