What is the geographic restriction on a Chocolate Bash franchisee after the agreement expires regarding involvement with a competitor?
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
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, a franchisee faces certain restrictions regarding competitive activities after the franchise agreement expires or is terminated. Specifically, for two years following the end of the agreement, the franchisee, any owner, or their spouse cannot have any ownership interest in, or be employed by, any competitor. This restriction applies within a five-mile radius of the franchisee's original territory or the territory of any other operating Chocolate Bash business at the time of termination or transfer.
This post-term non-compete clause means that a former Chocolate Bash franchisee is limited in their ability to engage with competing businesses in a defined geographic area. The restriction extends not only to the franchisee but also to owners and their spouses, ensuring a broad scope of coverage. The geographic scope is limited to a five-mile radius, which is a fairly standard restriction in the franchise industry, intended to protect Chocolate Bash's market share without unduly limiting the former franchisee's ability to earn a living.
However, the FDD also notes an important caveat for franchisees in California. Because California law may not enforce non-compete agreements that extend beyond the termination or expiration of the agreement, this post-term covenant may not be enforceable in California. Prospective franchisees should consult with a legal professional to understand the specific enforceability of this clause in their jurisdiction.
It's also important to note that if a restricted party fails to comply with these obligations, the restrictive period will be extended by an additional day for each day of noncompliance, potentially prolonging the period during which the franchisee is restricted from engaging with competitors. This provision serves as an additional deterrent against violating the non-compete agreement.