Is a Cilantro Taco Grill franchisee allowed to disrupt the business of other Cilantro Taco Grill franchisees after the agreement terminates?
Cilantro_Taco_Grill Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
Source: Item 23 — RECEIPT (FDD pages 52–208)
What This Means (2024 FDD)
According to Cilantro Taco Grill's 2024 Franchise Disclosure Document, a franchisee is restricted from disrupting the business of other Cilantro Taco Grill franchisees for a specified period after the termination of the franchise agreement. Specifically, for thirty-six months after the agreement ends, the franchisee cannot interfere with, disturb, disrupt, decrease, or otherwise jeopardize the business of the Franchisor or any Cilantro Taco Grill franchisees. This restriction applies to both direct and indirect actions.
This clause prevents a former franchisee from leveraging their knowledge of the Cilantro Taco Grill system to unfairly compete against existing franchisees or the franchisor. It aims to protect the goodwill associated with the Cilantro Taco Grill brand and maintain the stability of the franchise network. The restriction extends to actions that could harm the business, not just direct competition through a similar restaurant.
For a prospective franchisee, this means that upon termination or expiration of their franchise agreement, they must refrain from any activity that could negatively impact the Cilantro Taco Grill system. This includes not only avoiding direct competition within a certain radius but also refraining from any actions that could disrupt or harm the business of other franchisees or the franchisor. Failing to comply with these restrictions could result in legal action and potential damages.
It is important for franchisees to understand the scope and duration of these post-termination restrictions to avoid unintentional violations. Franchisees should seek legal counsel to fully understand their obligations and ensure compliance with the terms of the franchise agreement.