Does the non-compete apply after the transfer of all interest in the Burros Fries Franchise Agreement?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee and its Owners and/or Principals will agree not to compete, not to divert business, or attempt to hire employees, after the transfer in accordance with restrictions acceptable to us and substantially similar to those described in Section 19.C of this Agreement;
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 agreement does apply after the transfer of all interest in the Franchise Agreement. Specifically, the Franchisee and its Owners and/or Principals must agree not to compete, divert business, or attempt to hire employees after the transfer. These restrictions must be acceptable to Burros Fries and substantially similar to those described in Section 19.C of the Franchise Agreement.
Section 19.C states that during the term of the agreement and for two years from the date of a permitted transfer, the franchisee cannot engage in any business using any aspect of the Burros & Fries system or the overall Burros & Fries business concept, with similar products and/or services. This restriction applies within a ten-mile radius of the accepted location or any other Burros Fries franchise or company-owned business.
This means that if a franchisee sells their Burros Fries business, they (and their owners/principals) are still bound by a non-compete agreement. This agreement prevents them from opening a similar business or working for a competitor within a 10-mile radius of any Burros Fries location for a period of two years after the transfer. This is a standard practice in franchising to protect the brand and other franchisees in the system.
Prospective franchisees should carefully consider these non-compete terms, as they will limit their business activities for a significant period after selling their franchise. It is advisable to seek legal counsel to fully understand the implications of these restrictions before entering into a franchise agreement with Burros Fries.