In Michigan, what business activity is a Chocolate Fish Coffee franchisee prohibited from continuing after the expiration of the franchise to trigger compensation?
Chocolate_Fish_Coffee 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, 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)
Based on the 2024 Franchise Disclosure Document, the information needed to determine what business activity a Chocolate Fish Coffee franchisee in Michigan is prohibited from continuing after the expiration of the franchise agreement to trigger compensation is not available. The provided excerpts do discuss non-compete clauses and restrictions post-term, but they do not specify any state-specific stipulations or compensation triggers related to those restrictions.
Specifically, Item 23 generally discusses franchisee obligations and restrictions, including covenants not to compete. However, it does not detail how these covenants might vary by state or what specific actions would trigger compensation. The document outlines the restrictions on a franchisee after the agreement expires or is terminated, stating that for two years, the franchisee cannot engage with any competitor within five miles of their territory or any other Chocolate Fish Coffee business.
A prospective Chocolate Fish Coffee franchisee should ask the franchisor about any state-specific regulations regarding non-compete agreements, especially in states like Michigan. They should also inquire about the conditions under which they might owe compensation to the franchisor for violating these agreements. This information is crucial for understanding the full scope of their obligations and potential liabilities after the franchise agreement ends.