What is the effect of termination on the Chocolate Fish Coffee franchisee's obligations regarding non-competition?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
.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, lend money or provide financial assistance to, provide any services to, or be 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, lend money or provide financial assistance to, provide any services to, or be employed by, any Competitor within five miles of Franchisee's Territory or the territory of any other Chocolate Fish Coffee business operating on the date of termination or transfer, as applicable. If this Agreement is terminated before the Territory is determined, then the area of non-competition will the Development Area and the territory of any other Chocolate Fish Coffee business operating on the date of termination.
- (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 arbitrator or court, then the parties intend that the arbitrator or court modify such restriction to the extent reasonably necessary to protect the legitimate business interests of Chocolate Fish Franchising. Franchisee agrees that the existence of any claim it may have against Chocolate Fish Franchising shall not constitute a defense to the enforcement by Chocolate Fish 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 23 — RECEIPTS (FDD pages 41–119)
What This Means (2024 FDD)
According to the 2024 Chocolate Fish Coffee Franchise Disclosure Document, termination of the Franchise Agreement triggers certain post-termination obligations regarding non-competition. For two years after the agreement expires or is terminated, the franchisee, any owner, or any spouse of an owner cannot have any ownership interest in, lend money or provide financial assistance to, provide any services to, or be employed by any competitor within five miles of the franchisee's territory or the territory of any other Chocolate Fish Coffee business operating on the date of termination.
If the Franchise Agreement is terminated before the territory is determined, the area of non-competition will be the Development Area and the territory of any other Chocolate Fish Coffee business operating on the date of termination. These restrictions aim to protect Chocolate Fish Coffee's market and confidential information.
It's important to note that if a restricted party fails to comply with these non-compete obligations, the restrictive period will be extended by one day for each day of noncompliance. This clause ensures that Chocolate Fish Coffee can enforce the non-compete agreement effectively. The FDD also states that all obligations that survive termination, including those pertaining to non-competition, will remain in effect upon termination or expiration of the agreement.