After termination of the Craters & Freighters agreement, does the post-term restrictive covenant apply to the franchisee's owner(s)?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
raters & Freighters company-owned or Affiliate-owned business, to any Competitive Business by direct or indirect inducement or otherwise.
- 15.3 Post-Term Restrictive Covenants. For a period of two (2) years after the expiration, transfer, or termination of this Agreement, Franchisee and its owner(s) may not, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any other person, partnership, or corporation:
- 15.3.1 Perform any services for, consult for, engage in, acquire, lend money to, extend credit to, have any interest in, or be employed as an officer, director, executive, or principal of any Competitive Business at or within the following areas: (i) at the Premises of the Franchised Business; (ii) within the Territory granted to Franchisee under this Agreement; or (iii) within a radius of ten (10) miles of (a) the Premises of the Franchised Business, or (b) the premises of any other Craters & Freighters Franchised Business or any Craters & Freighters company-owned or Affiliate-owned outlet then-existing as of the date of the expiration, transfer, or termination of this Agreement.
- 15.3.2 Divert, attempt to divert, or solicit business or customers of the Franchised Business, any Craters & Freighters Franchised Business, or any Craters & Freighters company-owned or Affiliate-owned business, to any Competitive Business by direct or indirect inducement or otherwise.
- 15.3.3 Attempt to endorse, or enter into any business competing in whole or in part with Franchisor in granting franchisors or licenses, or establishing joint ventures, for Competitive Businesses.
- 15.4 Reasonableness of Restrictions. Franchisee and Franchisee's owner(s) acknowledge and confirm that the length of the term and geographical restrictions contained in Section 15.3 are fair and reasonable and not the result of overreaching, duress, or coercion of any kind. Franchisee and Franchisee's owner(s) also acknowledge and confirm that their full, uninhibited and faithful observance of each of the covenants contained in Section 15.3 will not cause any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained in Section 15.3 will not impair their ability to obtain employment commensurate with their respective abilities and on terms fully acceptable to them.
- 15.5 Enforcement.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, the post-term restrictive covenants apply to both the franchisee and the franchisee's owner(s). Specifically, for a period of two years after the expiration, transfer, or termination of the Franchise Agreement, both the franchisee and their owner(s) are restricted from engaging in certain competitive activities. These restrictions apply directly or indirectly, whether for themselves or through other entities.
The restrictions prevent the franchisee and their owner(s) from performing services for, consulting for, engaging in, acquiring, lending money to, extending credit to, having any interest in, or being employed by any Competitive Business. This prohibition extends to specific locations: the premises of the franchised business, the territory granted to the franchisee, and within a ten-mile radius of the franchised business or any other Craters & Freighters outlet. Additionally, they are prohibited from diverting or soliciting business or customers of the franchised business or any other Craters & Freighters business.
These covenants are acknowledged by both the franchisee and their owner(s) as material inducements for Craters & Freighters to enter into the agreement. Compliance with these terms is considered essential. The document also includes clauses addressing the reasonableness of these restrictions and enforcement mechanisms, including the reimbursement of legal costs and attorneys' fees if Craters & Freighters prevails in enforcing the agreement.