Can a Restricted Party be employed by a Competitor after the Chocolate Fish Coffee agreement expires?
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, a restricted party faces certain limitations regarding employment by a competitor after the franchise agreement expires or is terminated. Specifically, for two years following the expiration or termination of the agreement, a Restricted Party is prohibited from being employed by a Competitor.
This restriction applies if the Competitor is located 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 territory hasn't been determined before termination, the non-competition area will be the Development Area and the territory of any other Chocolate Fish Coffee business operating at the time of termination.
This post-term covenant not to compete is designed to protect Chocolate Fish Coffee's business interests by preventing former franchisees or related parties from leveraging inside knowledge to benefit a competing business within a defined geographic area. The agreement specifies that if a Restricted Party fails to comply with these obligations, the restrictive period will be extended by one day for each day of noncompliance, reinforcing the importance of adhering to the terms of the non-compete agreement.