Does the restriction on Prohibited Activities after the Cordova franchise relationship have any exceptions?
Cordova Franchise · 2025 FDDAnswer from 2025 FDD Document
g Franchise Relationship. Subject to the terms and conditions of Article 5 of this Agreement, below, you represent and agree that while you are an Owner of Franchisee or while your Spouse is an Owner of Franchisee (as applicable) that you will not engage in any Prohibited Activities. You agree that this restriction is fair and reasonable and that if you did engage in a Prohibited Activity that such actions would constitute acts of unfair competition and will irreparably harm the System and us.
- (c) Non-Competition After Franchise Relationship. You represent, acknowledge and agree that during the Restricted Period you will not engage in any Prohibited Activities; provided, however, that the Prohibited Activity relating to having an interest in a Competitive Business will
only apply with respect to a Competitive Business that is located within or provides competitive goods or services to customers/clients who are located within the Restricted Territory. If you engage in any Prohibited Activities during the Restricted Period, then you agree that your Restricted Period will be extended by the period of time during which you were engaging in the prohibited activity (any such extension of time will not be construed as a waiver of your breach or otherwise impair any of our rights or remedies relating to your breach). You agree that this restriction is fair and reasonable and that if you did engage in a Prohibited Activity that such actions would constitute acts of unfair competition and will irreparably harm us and the System.
- (d) Confidentiality Restrictions. You represent, acknowledge and agree that, at all times you: (i) shall not use the Confidential Information in any business or capacity other than the Franchised Business; (ii) shall maintain the confidentiality of the Confidential Information;
Source: Item 23 — RECEIPTS (FDD pages 44–195)
What This Means (2025 FDD)
According to Cordova's 2025 Franchise Disclosure Document, there are some exceptions to the post-term non-compete obligations. Franchisees are restricted from engaging in "Prohibited Activities" during the "Restricted Period," but this restriction has a specific condition. The prohibited activity relating to having an interest in a Competitive Business will only apply with respect to a Competitive Business that is located within or provides competitive goods or services to customers/clients who are located within the Restricted Territory.
The "Restricted Territory" is defined as (a) the franchisee's Operating Territory, (b) a 25-mile radius surrounding the Operating Territory, and (c) the operating territories of other Cordova businesses in operation or under development during the Restricted Period. However, if a court deems this territory too broad, the Restricted Territory will default to the franchisee's Operating Territory plus a 25-mile radius. The FDD states that if a franchisee engages in any Prohibited Activities during the Restricted Period, the Restricted Period will be extended by the period of time during which they were engaging in the prohibited activity.
This means that a former Cordova franchisee could potentially own or operate a competitive business outside of their defined Restricted Territory without violating the franchise agreement. However, engaging in prohibited activities within the Restricted Territory could lead to legal action from Cordova and an extension of the non-compete period. Prospective franchisees should carefully consider the scope and duration of these restrictions, as well as the definition of "Competitive Business" and "Restricted Territory," to understand the limitations on their business activities after the franchise agreement ends.