After termination of the Carbones Pizzeria franchise agreement, can a franchisee lease space to a competing business in the Restricted Area?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
ee may deliver outside of its Franchisee Territory into areas that are not in a franchisee territory of another Carbone's Pizza franchisee, but if Franchisor grants a franchise territory which includes any such area, Franchisee shall immediately cease delivery activities in such area. e
4. Covenant Not to Compete; Covenant as to Trade Secrets.
- a. Franchisee acknowledges Franchisor must be protected against the potential for unfair competition by Franchisee's use of Franchisor's training, assistance and trade secrets in direct competition with Franchisor or its franchisees. Franchisee therefore agrees that it shall not:
- (1) During the term of this Agreement, either directly or indirectly: (a) operate, own, manage, or be employed by or consult with, any Competing Business other than one operated under a valid franchise agreement with Franchisor, or any business or venture that is granting franchises or licenses for the operation of a Competing Business; or (b) divert or attempt to divert any customer or potential customer to any competitor of the Carbone System.
- (2) For two (2) years following the termination or assignment of this Agreement, either directly or indirectly, operate, own, manage, be employed by, lease space to, lend money to, or consult with, any Competing Business, other than one operated under a valid franchise agreement with Franchisor, or any business or venture that is granting franchises or licenses for the operation of a Competing Business, that is located or doing business in the Restricted Area.
- b. In the event of the violation of Section 4.a.(2) by Franchisee, the period of time Franchisee shall be required to abide by the breached obligation shall be extended to a period of two (2) years after Franchisee is no longer in breach of such obligation.
- c. Franchisee further agrees that at no time shall it or any of its owners or employees, use any Confidential Information (as defined below) directly or indirectly, except as necessary for the proper operation of the Franchise pursuant to this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 30–116)
What This Means (2025 FDD)
According to the 2025 Carbones Pizzeria Franchise Disclosure Document, for two years following the termination or assignment of the franchise agreement, a franchisee cannot lease space to a Competing Business, other than one operated under a valid franchise agreement with Carbones Pizzeria, or any business or venture that is granting franchises or licenses for the operation of a Competing Business, that is located or doing business in the Restricted Area. A "Competing Business" is defined as an eat-in, take-out, or combination eat-in/take-out restaurant of any other facility that serves pizza. The "Restricted Area" is defined as the Franchisee Territory, a radius of 25 miles from the Franchisee Territory and a radius of 5 miles from any other restaurant or other facility operated under the Carbones Pizzeria Names and Marks.
This means that after the franchise agreement is terminated, a former Carbones Pizzeria franchisee is restricted from leasing property to competing pizza businesses within a defined geographic area. This restriction is in place to protect Carbones Pizzeria from unfair competition using the knowledge and resources gained during the franchise term. The restriction extends for a period of two years after the termination or assignment of the agreement.
If a franchisee violates this non-compete clause by leasing space to a competing business, the period during which the franchisee must abide by the obligation will be extended for two years after the breach is resolved. This provision serves as a deterrent, ensuring that former franchisees comply with the terms of the agreement and do not engage in activities that could harm the Carbones Pizzeria brand. Carbones Pizzeria can also seek injunctive relief from a court to stop the franchisee from violating the non-compete agreement.