Does the Cilantro Taco Grill agreement allow for any exceptions to the noncompetition covenants?
Cilantro_Taco_Grill Franchise · 2024 FDDAnswer from 2024 FDD Document
ill be valuable to him or her in the development and operation of Cilantro Taco Grill outlets, and that gaining access to such specialized training, trade secrets and Confidential Information is, therefore, a primary reason why Multi-Unit Operator is entering into this Agreement. In consideration for such specialized training, trade secrets, Confidential Information and rights, Multi-Unit Operator covenants that, except as otherwise approved in writing by Franchisor:
- 8.3.1 During the term of this Agreement, Multi-Unit Operator shall not, either directly or indirectly, for himself or herself or through, on behalf of, or in conjunction with, any person or entity (i) divert, or attempt to divert, any business or customer of the Multi-Unit Operator's Cilantro Taco Grill outlets or of other Multi-Unit Operators or franchisees in the System to any competitor, by direct or indirect inducement or otherwise; (ii) participate as an owner, partner, director, officer, employee, consultant or agent or serve in any other capacity in any restaurant or food service
business featuring Mexican cuisine; or (iii) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System or (iv) in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Cilantro Taco Grill Multi-Unit Operators or franchisees or Franchisor-affiliated outlets.
- 8.3.2 Upon the expiration or earlier termination of this Agreement or upon a Transfer and continuing for twenty-four (24) months thereafter, Multi-Unit Operator shall not, either directly or indirectly, for himself or herself or through, on behalf of or in conjunction with any person or entity (i) divert, or attempt to divert, any business or customer of Multi-Unit Operator's Cilantro Taco Grill outlets or of other franchisees in the System to any competitor, by direct or indirect inducement or otherwise; or (ii) participate as an owner, partner, director, officer, employee, consultant or agent or serve in any other capacity in any restaurant or food service business featuring Mexican cuisine within twenty (20) miles of the Development Area or any Cilantro Taco Grill location; or (iii) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System or (iv) in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Cilantro Taco Grill Multi-Unit Operators or franchisees.
- 8.4 Reasonableness of Restrictions. Multi-Unit Operator acknowledges and agrees that the covenants not to compete set forth in this Agreement are fair and reasonable and will not impose any undue hardship on Multi-Unit Operator since Multi-Unit Operator has other considerable skills, experience and education which afford Multi-Unit Operator the opportunity to derive income from other endeavors.
- 8.5 Reduction of Time or Scope. If the period of time or the geographic scope specified above, should be adjudged unreasonable in any proceeding, then the period of time will be reduced by such number of months or the geographic scope will be reduced by the elimination of such portion thereof, or both, so that such restrictions may be enforced for such time and scope as are adjudged to be reasonable. In addition, Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in this Article 8 or any portion thereof, without Multi-Unit Operator's consent, effective immediately upon receipt by Multi-Unit Operator of written notice thereof, and Multi-Unit Operator agrees to forthwith comply with any covenant as so modified.
- 8.6 Relief. Multi-Unit Operator acknowledges that a violation of the covenants not to compete contained in this Agreement would result in immediate and irreparable injury to Franchisor for which no adequate remedy at law will be available. Accordingly, Multi-Unit Operator hereby consents to the entry of an injunction prohibiting any conduct by Multi-Unit Operator in violation of the terms of the covenants not to compete set forth in this Agreement. Franchisor may further avail itself of any other legal or equitable rights and remedies which it may have under this Agreement or otherwise.
Source: Item 23 — RECEIPT (FDD pages 52–208)
What This Means (2024 FDD)
According to the 2024 Cilantro Taco Grill Franchise Disclosure Document, the noncompetition covenants can be waived with written approval from the Franchisor. This applies both during the term of the agreement and after its expiration or termination.
For multi-unit operators, during the term of the agreement, they are restricted from engaging in any business that competes with Cilantro Taco Grill, unless explicitly approved in writing by the franchisor. This includes diverting business, participating in Mexican cuisine restaurants, or acting in a way that harms the goodwill of the Cilantro Taco Grill brand. After the agreement ends, the multi-unit operator is subject to similar restrictions for 24 months within 20 miles of their Development Area or any Cilantro Taco Grill location.
For franchisees, the agreement specifies that during the term of the agreement, the franchisee and any principals are restricted from competitive activities unless approved in writing by Cilantro Taco Grill. Post-termination, this restriction continues for 36 months within 20 miles of the Territory or any Cilantro Taco Grill location. Additionally, Cilantro Taco Grill retains the right to reduce the scope of any non-compete covenant at its discretion by providing written notice to the multi-unit operator, who must then comply with the modified covenant.
These non-compete terms are designed to protect Cilantro Taco Grill's confidential information, trade secrets, and goodwill. However, the franchisor's ability to approve exceptions or modify the covenants provides some flexibility. A prospective franchisee should carefully consider these restrictions and seek clarification from Cilantro Taco Grill regarding the circumstances under which exceptions may be granted.