Is the Guarantor for a Chocolate Bash franchise released from their obligations after the Franchise Agreement terminates?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
- **2.
Confidential Information.** With respect to all Confidential Information Guarantor shall (a) adhere to all security procedures prescribed by CB Franchising for maintaining confidentiality, (b) disclose such information to its employees only to the extent necessary for the operation of the Business; (c) not use any such information in any other business or in any manner not specifically authorized or approved in writing by CB Franchising, (d) exercise the highest degree of diligence and make every effort to maintain the confidentiality of all such information during and after the term of the Franchise Agreement, (e) not copy or otherwise reproduce any Confidential Information, and (f) promptly report any unauthorized disclosure or use of Confidential Information.
Guarantor acknowledges that all Confidential Information is owned by CB Franchising or its affiliates (except for Confidential Information which CB Franchising licenses
from another person or entity). Guarantor acknowledges that all customer data generated or obtained by Guarantor is Confidential Information belonging to CB Franchising. This Section will survive the termination or expiration of the Franchise Agreement indefinitely.
3. Covenants Not to Compete.
- (a) Restriction In Term.
During the term of the Franchise Agreement, Guarantor shall not directly or indirectly have any ownership interest in, or be engaged or employed by, any Competitor.
- (b) Restriction Post Term.
For two years after the Franchise Agreement expires or is terminated for any reason (or, if applicable, for two years after a Transfer by Guarantor), Guarantor shall not directly or indirectly have any ownership interest in, or be engaged or employed by, any Competitor located 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.
Guarantor agrees that each of the foregoing covenants is independent of any other covenant or provision of this Guaranty or the Franchise 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.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, the Guarantor is not fully released from their obligations upon termination of the Franchise Agreement.
Specifically, the Guarantor must maintain the confidentiality of Chocolate Bash's proprietary information both during and after the term of the Franchise Agreement. The Guarantor also agrees to certain non-compete restrictions. During the term of the Franchise Agreement, the Guarantor cannot have any ownership interest in, or be employed by, any competitor. For two years after the Franchise Agreement expires or is terminated, the Guarantor cannot have any ownership interest in, or be employed by, any competitor located within five miles of the franchisee's territory or the territory of any other Chocolate Bash business operating on the date of termination.
These obligations are designed to protect Chocolate Bash's business interests and brand reputation even after a franchise relationship ends. The FDD states that these covenants are independent of any other covenant or provision of the Guaranty or the Franchise Agreement. If a court finds any portion of these covenants unenforceable, the parties intend for the court to modify the restriction to protect Chocolate Bash's legitimate business interests.