Does the competitive restriction for a Capriottis Sandwich Shop apply after transfers and other events?
Capriottis_Sandwich_Shop Franchise · 2025 FDDAnswer from 2025 FDD Document
PRIOTTI'S Restaurants. Under no circumstances will Franchisor control the forms or terms of employment agreements Franchisee uses with Franchised Restaurant employees or otherwise be responsible for Franchisee's labor relations or employment practices.
Upon Franchisor's termination of this Agreement for any reason, Franchisee's termination of this Agreement without cause, or expiration of this Agreement (without the grant of a renewal franchise), Franchisee and its owners agree that neither they nor any member of their Immediate Families will have any direct or indirect, controlling or non-controlling interest as an owner, whether of record, beneficial, or otherwise, or perform services as a director, officer, manager, employee, consultant, representative, or agent, in any Competitive Business located or operating: (i) at the Franchised Restaurant's site; or (ii) within five (5) miles of the Franchised Restaurant's site; or (iii) within three (3) miles of another CAPRIOTTI'S Restaurant in operation or under construction on the later of the effective date of termination or expiration
or the date on which the restricted person begins to comply with this Section, provided that this restriction does not prohibit ownership of shares of a class of securities publicly-traded on a United States stock exchange representing less than three percent (3%) of the number of shares of that class of securities issued and outstanding.
Franchisee, each owner, and their Immediate Families will each be bound by these competitive restrictions for two (2) years beginning on the effective date of this Agreement's termination or expiration.
Source: Item 22 — CONTRACTS (FDD page 73)
What This Means (2025 FDD)
According to the 2025 Capriottis Sandwich Shop Franchise Disclosure Document, the competitive restriction applies to the franchisee and their immediate family after certain events. Specifically, upon the termination of the Franchise Agreement by Capriottis Sandwich Shop for any reason, the franchisee's termination without cause, or the expiration of the agreement without renewal, the franchisee and their immediate family are subject to certain restrictions. Immediate family includes the individual, their spouse, and all children of the individual or spouse.
The franchisee and their immediate family are restricted from having a direct or indirect interest in, or performing services for, any Competitive Business. A Competitive Business is defined as any business offering hot and cold submarine sandwiches and/or other deli-related menu items (excluding soft drinks) or granting franchises or licenses to others for such businesses, excluding another franchised Capriottis Sandwich Shop. This restriction applies if the Competitive Business is located or operating at the former Franchised Restaurant's site, within five miles of that site, or within three miles of another operating or under-construction Capriottis Sandwich Shop.
However, there is an exception to this restriction. The ownership of shares of a class of securities publicly-traded on a United States stock exchange is permitted, provided that the shares represent less than three percent of the total outstanding shares of that class of securities. This means a franchisee can invest in a publicly traded competitor, but their ownership stake must remain below this threshold. This post-term non-compete is a significant consideration for prospective franchisees, as it limits their ability to engage in similar business ventures after the franchise agreement ends or is terminated.