What is the scope of the 'Restricted Territory' for a Chop5 Salad Kitchen franchisee?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
name CHOP5 Salad Kitchen®.
"Restricted Period" means the one (1) year period after the earliest to occur of the following: (a) the termination or expiration of the Franchise Agreement; (b) the date on which Franchisee assigns the Franchise Agreement to another person with respect to whom neither you nor your spouse holds any direct or indirect ownership interest; or (c) the date on which neither you nor your spouse holds any direct or indirect ownership interest in the Franchisee entity or the Restaurant that it operates.
"Restricted Territory" means: the geographic area within: (a) a 10-mile radius from Franchisee's Restaurant (and including the Restaurant's premises itself); and (b) a 10-mile radius from all other Restaurants that: (i) are operating or under construction as of the date of this Agreement; (ii) remain in operation or under construction during all or any part of the Restricted Period; and (iii) are located in any state in which Franchisee (or any affiliate of Franchisee) operates, or has operated, a Restaurant;
Source: Item 23 — RECEIPT (FDD pages 50–178)
What This Means (2024 FDD)
According to the 2024 Chop5 Salad Kitchen Franchise Disclosure Document, the 'Restricted Territory' is defined as the geographic area within a 10-mile radius from the franchisee's restaurant, including the restaurant's premises. It also includes a 10-mile radius from all other Chop5 Salad Kitchen restaurants that are either operating or under construction as of the date of the agreement. These restaurants must remain in operation or under construction during any part of the Restricted Period and be located in the same state where the franchisee or their affiliate operates or has operated a Chop5 Salad Kitchen restaurant.
However, the document includes a provision that if a court deems the 10-mile radius too broad to be enforceable, the 'Restricted Territory' will then be defined as a smaller area. In this case, the restricted territory would shrink to a 5-mile radius from the franchisee's restaurant, including its premises, and a 5-mile radius from other qualifying Chop5 Salad Kitchen restaurants under the same conditions as the 10-mile radius definition.
This clause is important for prospective franchisees as it defines the area in which they are protected from competition from other Chop5 Salad Kitchen locations. The provision for a reduced radius based on court decisions introduces some uncertainty, but it aims to ensure the enforceability of the territorial restriction. Franchisees should be aware of these conditions and consider the potential impact on their business if the restricted territory is reduced.