Are there any restrictive covenants, other than those waived by the pre-existing business, that would be breached by the acquisition and operation of a Burros Fries franchise?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
trolled by or under common control with Franchisee. The initial Franchisee's Principals shall be listed on Schedule 7 of this Agreement.
C. Franchisee Will Not Compete Against Franchisor
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. In any jurisdiction in which the covenant contained in this Section 19 or any part of it is deemed not enforceable in whole or in part, Franchisee hereby grants us an option to purchase Franchisee's Business on expiration or termination of this Agreement. In such case, we may exercise this option by giving thirty (30) days' written
notice to Franchisee (Sections 22.C and 22.E). On termination or expiration, Franchisee will deliver to us a list of these Assets (as described in Section 24.G) and their cost as well as receipts evidencing their cost. Franchisee must relinquish possession on receipt of payment, but no later than ninety (90) days after expiration or termination. Franchisee's other post termination obligations under this Agreement and by law remain in effect on termination or expiration of this Agreement.
D. Exception to Covenant Not to Compete
Section 19.C hereof shall not apply to ownership by Franchisee or any of its Owners of less than a five percent (5%) beneficial interest in the outstanding equity securities of any Publicly-Held Corporation. As used in this Agreement the term "Publicly-Held Corporation" shall be deemed to refer to a corporation which has securities that has been registered under the Federal Securities Exchange Act of 1934.
E. Franchisee Will Not Divert Business
During the term of this Agreement and for a period of two (2) years following the expiration or termination of this Agreement, Franchisee agrees that it will not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, or legal entity:
-
- Solicit, service, sell or attempt to divert business directly or indirectly to any competitor by direct or indirect inducement or otherwise, or any patrons of its Business or any other franchisee including company-owned businesses with which or with whom Franchisee has had contact during the term of this Agreement to any competitor by direct or indirect inducement or otherwise; or
-
- Do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Names and Marks or the System or both; or
-
- Induce, directly or indirectly, any person (regardless of position) who is at that time employed by us or by any other franchisee of ours, to leave his or her employment. This also applies to any person (regardless of position) who was at any time during the prior twelve (12) months employed by us, any company-owned business or by any other franchisee of ours. The only exception is if Franchisee receives written consent by us or any other franchisee and works out some type of an arrangement to compensate the former employer for reasonable costs and expenses related to replacing the person.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2024 FDD)
According to the 2024 Burros Fries Franchise Disclosure Document, franchisees are subject to certain restrictive covenants, primarily concerning non-competition, both during the term of the agreement and for a period after its termination or transfer. Specifically, franchisees are prohibited from engaging in any business that is the same as or similar to the Burros Fries business within a 10-mile radius of their approved location or any other Burros Fries location. This restriction applies to owning, operating, or having a financial interest in such a competing business.
This non-compete agreement extends for two years from the date of a permitted transfer, the expiration or termination of the agreement, or a final order from an arbitrator or court. The franchisee also agrees not to divert business or attempt to hire employees after the transfer, adhering to restrictions similar to those in the non-compete section of the agreement. Furthermore, franchisees must not identify themselves or any business as a current or former Burros Fries owner, or use any marks or trade names associated with Burros Fries, except for other Burros Fries businesses they own and operate.
Burros Fries retains the right to seek injunctive relief and specific performance in the event of a breach or threatened breach of the agreement, without needing to demonstrate actual harm or provide a bond. The franchisee is responsible for all expenses, including court costs and legal fees, incurred by Burros Fries in enforcing the agreement. The FDD also states that the failure by Burros Fries to object to any breach does not constitute a waiver of any later breach.
These covenants are designed to protect Burros Fries's interests in its system, confidential information, and market presence. Prospective franchisees should carefully consider these restrictions and how they might impact their future business activities, especially if they have prior experience in the restaurant industry or plan to operate other businesses concurrently. It is advisable to seek legal counsel to fully understand the scope and implications of these non-compete obligations.