What is the geographic scope of the non-compete agreement for Chocolate Fish Coffee after termination or transfer?
Chocolate_Fish_Coffee 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, 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 Chocolate Fish Coffee's 2024 Franchise Disclosure Document, the non-compete agreement restricts certain activities for a period of two years after the franchise agreement expires or is terminated. This restriction also applies for two years after a transfer of the franchise.
The geographic scope of the non-compete is limited to within five miles of the franchisee's territory or the territory of any other Chocolate Fish Coffee business operating on the date of termination or transfer. If the franchise agreement is terminated before the territory is determined, the non-competition area will be the Development Area and the territory of any other Chocolate Fish Coffee business operating on the date of termination.
The agreement specifies that 'Restricted Parties' which include the franchisee, any owner, or any spouse of an owner, are prohibited from having any ownership interest in, lending money or providing financial assistance to, providing any services to, or being employed by any competitor. If a restricted party fails to comply with these obligations, the restrictive period will be extended by one day for each day of noncompliance. This non-compete aims to protect Chocolate Fish Coffee's business interests by preventing former franchisees from directly competing in the immediate vicinity of existing Chocolate Fish Coffee locations.