Are there any exceptions to the non-competition covenants for a Multi-Unit Operator of Cilantro Taco Grill?
Cilantro_Taco_Grill Franchise · 2024 FDDAnswer from 2024 FDD Document
lti-Unit Operator shall take all steps necessary, at Multi-Unit Operator's own expense, to protect the Confidential Information and shall immediately notify Franchisor if Multi-Unit Operator finds that any Confidential Information has been divulged in violation of this Agreement.
- 8.3 Noncompetition Covenants. Multi-Unit Operator acknowledges that, pursuant to this Agreement, Multi-Unit Operator will receive valuable training, trade secrets and Confidential Information of the System that are beyond the present knowledge, training and experience of Multi-Unit Operator. Multi-Unit Operator acknowledges that such specialized training, trade secrets and Confidential Information provide a competitive advantage and will 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.
Source: Item 23 — RECEIPT (FDD pages 52–208)
What This Means (2024 FDD)
According to Cilantro Taco Grill's 2024 Franchise Disclosure Document, there are limited exceptions to the non-competition covenants for Multi-Unit Operators. During the term of the agreement, a Multi-Unit Operator is restricted from engaging in any competitive activities, unless explicitly approved in writing by Cilantro Taco Grill. This includes diverting business from Cilantro Taco Grill outlets, participating in Mexican cuisine restaurants, or acting in any way that could harm the goodwill associated with the Cilantro Taco Grill brand.
Post-termination, for a period of 24 months, the Multi-Unit Operator is restricted from involvement in any Mexican cuisine restaurant business within 20 miles of the Development Area or any Cilantro Taco Grill location. However, Cilantro Taco Grill retains the right to reduce the scope of these non-compete covenants at its discretion. This means Cilantro Taco Grill can modify the time period or geographic area of the non-compete, providing some flexibility.
The FDD also states that if any court finds the non-compete restrictions to be unreasonable, the restrictions will be reduced in time or scope to what is considered reasonable. This clause aims to ensure the enforceability of the non-compete agreement while protecting the Multi-Unit Operator from undue hardship. Prospective franchisees should be aware of these restrictions and the potential for Cilantro Taco Grill to modify them, as non-compliance constitutes a material default of the agreement.