Does the FDD specify the duration of the non-competition covenant after the Cilantro Taco Grill agreement terminates?
Cilantro_Taco_Grill Franchise · 2024 FDDAnswer from 2024 FDD Document
b, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Cilantro Taco Grill franchisees or Franchisor-affiliated outlets.
- 19.5.2 Upon the expiration or earlier termination of this Agreement or upon a Transfer and continuing for thirty-six (36) months thereafter, Franchisee and Principals, if any, shall not, either directly or indirectly, for themselves 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 Franchised Business 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 Territory 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 franchisees.
- 19.6 Reasonableness of Restrictions. Franchisee and each Principal, if any, 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 Franchisee or Principals, if any, since Franchisee or Principals, as the case may be, have other considerable skills, experience and education which afford Franchisee or Principals, as the case may be, the opportunity to derive income from other endeavors.
- 19.7 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 Paragraph 19 or any portion thereof, without Franchisee's consent, effective immediately upon receipt by Franchisee of written notice thereof, and Franchisee agrees to forthwith comply with any covenant as so modified.
- 19.8 Injunctive Relief. Franchisee and each Principal, if any, 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.
Source: Item 23 — RECEIPT (FDD pages 52–208)
What This Means (2024 FDD)
According to Cilantro Taco Grill's 2024 Franchise Disclosure Document, the non-competition covenant extends for a specific duration after the termination or transfer of the agreement. For a standard franchisee, this period is thirty-six months. During this time, the franchisee and any principals are restricted from engaging in any restaurant or food service business featuring Mexican cuisine within 20 miles of their former territory or any Cilantro Taco Grill location. This restriction includes not diverting business or customers to competitors and refraining from any actions that could harm the goodwill associated with the Cilantro Taco Grill brand.
For multi-unit operators, the non-competition covenant lasts for twenty-four months following the expiration or termination of the agreement or upon a transfer. Similar to franchisees, multi-unit operators are prohibited from participating in any Mexican cuisine restaurant or food service business within 20 miles of the Development Area or any Cilantro Taco Grill location. They are also barred from diverting business or customers to competitors and from taking any actions that could be detrimental to the Cilantro Taco Grill system.
These non-compete clauses are designed to protect Cilantro Taco Grill's market position and brand integrity. The FDD also states that Cilantro Taco Grill can reduce the scope of any covenant set forth in this Article 8 or any portion thereof, without the Multi-Unit Operator's consent, effective immediately upon receipt by the Multi-Unit Operator of written notice thereof, and the Multi-Unit Operator agrees to forthwith comply with any covenant as so modified. Prospective franchisees should carefully consider these restrictions and how they might impact their future business opportunities should they decide to leave the Cilantro Taco Grill system.