Is the post-term non-compete restriction for a Chocolate Bash franchise measured from the date of termination or transfer?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
- (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 Chocolate Bash's 2024 Franchise Disclosure Document, the post-term non-compete restriction is measured from the date of termination or transfer. Specifically, for two years after the franchise agreement expires or is terminated for any reason, or for two years after a transfer, the franchisee, any owner, or any spouse of an owner cannot have any ownership interest in, or be engaged or employed by, any competitor. This restriction applies within five miles of the franchisee's territory or the territory of any other Chocolate Bash business operating on the date of termination or transfer.
This means that if a franchisee sells or transfers their Chocolate Bash franchise, the two-year non-compete period begins from the date of the transfer. Similarly, if the franchise agreement is terminated, the non-compete period starts from the termination date. This provision ensures that former franchisees or owners do not immediately compete with the Chocolate Bash system in the same geographic area, protecting the brand's market share and confidential information.
It is important to note that in California, this covenant may not be enforceable under California Law. 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.