After the termination of a Craters & Freighters franchise agreement, must the franchisee comply with post-term restrictive covenants?
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. Each of the foregoing covenants in this Section 15 will be construed as severable and independent and will be interpreted and applied consistent with the requirements of reasonableness and equity. In the event a court of competent jurisdiction determines the business, time, or geographic limitations contained in this Agreement are illegal, invalid, or unenforceable, then, the court so holding will reduce the limitation necessary to render such restriction enforceable by the court. In addition to any other remedies available at law or equity, Franchisor will have the right to injunctive relief for any violation or threatened violation of any covenant described in this Section 15 by Franchisee or any of Franchisee's owners.
- 15.6 Confidentiality and Non-Competition Agreement. Contemporaneously with the execution of this Agreement, Franchisee's owner(s) must sign the Confidentiality and Non-Competition Agreement attached hereto as Attachment F and must furnish Franchisor with a copy of each executed agreement within thirty (30) days of entering into this Agreement.
16. TRANSFER.
- 16.1 By Franchisor.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, franchisees and their owners must adhere to post-term restrictive covenants for two years after the franchise agreement's expiration, transfer, or termination. These covenants prevent them from engaging in or being involved with any Competitive Business within specific areas. These areas include the premises of the franchised business, the territory granted to the franchisee, or within a 10-mile radius of the franchised business's premises, or any other Craters & Freighters outlet.
Specifically, the franchisee is prohibited from performing services for, consulting for, engaging in, acquiring, lending money to, extending credit to, having any interest in, or being employed by a Competitive Business within the restricted area. Additionally, franchisees are barred from diverting or soliciting business or customers away from the franchised business, any Craters & Freighters franchised business, or any Craters & Freighters company-owned or affiliate-owned business.
The Franchise Agreement states that the restricted person acknowledges that the term and geographical restrictions are fair and reasonable. Should a court deem any restriction unenforceable due to its scope, geographic area, type of business activity, or length of time, the restricted person must comply with any lesser restriction the court deems enforceable. If Craters & Freighters initiates legal proceedings to enforce the agreement and wins, the restricted person must reimburse Craters & Freighters for enforcement costs and expenses, including attorney's fees.