Does the non-compete restriction for Burros Fries extend to businesses under construction?
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 Burros Fries' 2024 Franchise Disclosure Document, the non-compete restriction does extend to businesses under construction. Specifically, during the term of the Franchise Agreement and for two years after a transfer, expiration, or termination, franchisees are prohibited from engaging in any competitive business within a 10-mile radius. This restriction applies not only to existing Burros Fries franchises and company-owned businesses but also to those 'in existence or under construction'.
This means that a franchisee cannot own, operate, or have any financial interest in a competing business within the specified radius, even if that competing business is still being built. This clause aims to protect Burros Fries' market share and brand recognition by preventing franchisees from diverting business to competing ventures, whether existing or planned. The non-compete agreement is in place to protect the franchisor's confidential information, system, and overall business concept.
The FDD also states that the unenforceability of the non-compete in one jurisdiction does not affect its enforceability in other jurisdictions. Additionally, access to trade secrets provided during training and ongoing support programs is a specific consideration for this covenant. If any part of the non-compete is deemed unenforceable, Burros Fries has the option to purchase the franchisee's business upon expiration or termination of the agreement.
For a prospective franchisee, this clause highlights the importance of carefully considering the location of their Burros Fries franchise and the potential for competition within a 10-mile radius. It also underscores the need to fully understand the terms of the non-compete agreement and its implications both during the franchise term and for two years afterward. Franchisees should be aware that this restriction applies not only to existing businesses but also to those that are planned or under construction, ensuring comprehensive protection for the Burros Fries brand.