factual

After a transfer of a Chocolate Fish Coffee franchise, how long does the post-term non-compete restriction last?

Chocolate_Fish_Coffee Franchise · 2024 FDD

Answer 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 the 2024 Chocolate Fish Coffee Franchise Disclosure Document, if a Chocolate Fish Coffee franchise is transferred, a non-compete restriction applies for two years after the transfer. This restriction prevents the franchisee, any owner, or any spouse of an owner from having an ownership interest in, lending money to, providing services to, or being employed by a competitor.

The non-compete area extends to within five miles of the transferred Chocolate Fish Coffee franchise's territory or the territory of any other Chocolate Fish Coffee business operating on the date of the transfer. If the territory hasn't been determined when the agreement is terminated, the non-compete area will be the Development Area and the territory of any other Chocolate Fish Coffee business operating on the date of termination.

It's important to note that if a restricted party fails to comply with the non-compete obligations, the restriction period will be extended by one day for each day of noncompliance. This clause aims to protect Chocolate Fish Coffee's business interests by preventing former franchisees from immediately competing and potentially drawing customers away from existing locations.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.