Is owning other Costa Vida Fresh Mexican Grill franchises considered a 'Competitive Business'?
Costa_Vida_Fresh_Mexican_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
Therefore, you agree (and agree to cause all Owners if Franchisee is an Entity, and all other Restricted Persons), during the term of this Agreement, not to have any direct or indirect interest in a Competitive Business, or perform services of any type as an owner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any retail food establishment (including any restaurant) in which any of the following categories constitutes more than 20% of its revenues or 20% of its menu: (1) burritos, tacos, quesadillas; (2) Latin American, Central American, or Mexican food, desserts, or beverages of any kind; as well as any business that manufactures, wholesales, and/or distributes Latin American, Central American, or Mexican food, desserts, or beverages of any kind, including tortillas and salsas; and (3) or any franchisor or licensor of the same (each a "Competitive Business"). The restrictions of this Section 9.B, including the definition of Competitive Business, will not apply to: (1) the ownership of shares of a class of securities listed on a public stock exchange or traded on the over-the-counter market that represent two percent (2%) or less of the number of shares of that class of securities issued and outstanding; or (2) the ownership or operation of other Costa Vida Restaurants that are licensed or franchised by us or any of our Affiliates.
Source: Item 22 — CONTRACTS (FDD pages 66–67)
What This Means (2025 FDD)
According to Costa Vida Fresh Mexican Grill's 2025 Franchise Disclosure Document, owning or operating other Costa Vida Fresh Mexican Grill restaurants that are licensed or franchised by Costa Vida Fresh Mexican Grill or its affiliates is explicitly excluded from being considered a 'Competitive Business.' This means franchisees are generally permitted to own and operate multiple Costa Vida Fresh Mexican Grill locations without violating non-compete agreements within the franchise agreement.
This exception encourages franchisees to expand their investment within the Costa Vida Fresh Mexican Grill system. It allows existing franchisees to grow their business and potentially benefit from economies of scale, such as shared management and marketing costs across multiple locations. This can be a significant advantage for experienced franchisees looking to increase their stake in the brand.
However, it is important to note that this exception applies only to Costa Vida Fresh Mexican Grill franchises licensed or franchised by the company. Engaging in any other competitive business activity, as defined in the franchise agreement, could still be a violation. A 'Competitive Business' is defined as any retail food establishment (including any restaurant) in which any of the following categories constitutes more than 20% of its revenues or 20% of its menu: (1) burritos, tacos, quesadillas; (2) Latin American, Central American, or Mexican food, desserts, or beverages of any kind; as well as any business that manufactures, wholesales, and/or distributes Latin American, Central American, or Mexican food, desserts, or beverages of any kind, including tortillas and salsas; and (3) or any franchisor or licensor of the same.
Prospective franchisees should carefully review the definition of 'Competitive Business' in the franchise agreement and seek legal counsel to fully understand the scope of the non-compete provisions and the implications of owning or investing in other businesses, even after the franchise term ends. Understanding these restrictions is crucial for making informed decisions about their investment and business activities.