What is the duration of the post-term non-compete restriction for a Chocolate Bash franchise after a transfer?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
13.2 Covenants Not to Compete.**
- (a) Restriction In Term. During the term of this Agreement, neither Franchisee, any Owner, nor any spouse of an Owner (the "Restricted Parties") shall directly or indirectly have any ownership interest in, or be engaged or employed by, any Competitor.
- (b) Restriction Post Term. For two years after this Agreement expires or is terminated for any reason (or, if applicable, for two years after a Transfer), no Restricted Party shall directly or indirectly have any ownership interest in, or be engaged or employed by, any Competitor within five miles of Franchisee's Territory or the territory of any other Chocolate Bash business operating on the date of termination or transfer, as applicable.
- (c) Interpretation. The parties agree that each of the foregoing covenants is independent of any other covenant or provision of this Agreement. If all or any portion of the covenants in this Section is held to be unenforceable or unreasonable by any court, then the parties intend that the court modify such restriction to the extent reasonably necessary to protect the legitimate business interests of CB Franchising. Franchisee agrees that the existence of any claim it may have against CB Franchising shall not constitute a defense to the enforcement by CB Franchising of the covenants of this Section. If a Restricted Party fails to comply with the obligations under this Section during the restrictive period, then the restrictive period will be extended an additional day for each day of noncompliance.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to the 2024 Chocolate Bash Franchise Disclosure Document, if a Chocolate Bash franchise agreement is terminated, expires, or is transferred, the franchisee (or any owner) is subject to a post-term non-compete restriction. This restriction lasts for two years after the agreement expires, is terminated, or after a transfer.
During this two-year period, the franchisee cannot have any ownership interest in, or be employed by, any competitor. This restriction applies within a five-mile radius of the franchisee's territory or the territory of any other Chocolate Bash business operating on the date of termination or transfer.
It's important to note that in California, such non-compete clauses may not be enforceable under California law, as indicated in the FDD addendum. The FDD also states that if a Restricted Party fails to comply with the obligations under this section during the restrictive period, then the restrictive period will be extended an additional day for each day of noncompliance.