Is a proposed Burros Fries transferee allowed to operate a competing business?
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 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.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to Burros Fries's 2024 Franchise Disclosure Document, a franchisee and its owners/principals will agree not to compete, divert business, or attempt to hire employees after the transfer, in accordance with restrictions acceptable to Burros Fries and substantially similar to those described in Section 19.C of the Franchise Agreement.
Specifically, the franchisee agrees that during the term of the agreement and for two years after a permitted transfer, expiration, or termination, they will not own, maintain, operate, engage in, be employed by, or have any interest in any business using any aspect of the Burros Fries system or overall business concept, with similar products and/or services. This restriction applies within a 10-mile radius of the accepted location or any other Burros Fries franchise or company-owned business.
These restrictions are common in franchising to protect the brand and prevent franchisees from using the franchisor's confidential information and system to compete against them after leaving the system. The FDD also states that the unenforceability of the non-compete clause in one jurisdiction does not affect its enforceability in other jurisdictions, and that this covenant is given in specific consideration for access to trade secrets provided as part of Burros Fries' training or ongoing support programs.