What is the geographic scope of the post-term restriction for Crown Gold Exchange franchisees?
Crown_Gold_Exchange Franchise · 2024 FDDAnswer from 2024 FDD Document
- (b) Restriction Post Term. For two years after this Agreement expires or is terminated for any reason (or, if applicable, for two years after a Transfer), no Restricted Party shall directly or indirectly have any ownership interest in, lend money or provide financial assistance to, provide any services to, or be employed by, any Competitor within five miles of Franchisee's Territory or the territory of any other Crown Gold Exchange business operating on the date of termination or transfer, as applicable. If this Agreement is terminated before the Territory is determined, then the area of non-competition will the Development Area and the territory of any other Crown Gold Exchange business operating on the date of termination.
- (c) Interpretation. The parties agree that each of the foregoing covenants is independent of any other covenant or provision of this Agreement. If all or any portion of the covenants in this Section is held to be unenforceable or unreasonable by any arbitrator or court, then the parties intend that the arbitrator or court modify such restriction to the extent reasonably necessary to protect the legitimate business interests of Crown Gold Franchising. Franchisee agrees that the existence of any claim it may have against Crown Gold Franchising shall not constitute a defense to the enforcement by Crown Gold Franchising of the covenants of this Section. If a Restricted Party fails to comply with the obligations under this Section during the restrictive period, then the restrictive period will be extended an additional day for each day of noncompliance.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Crown Gold Exchange's 2024 Franchise Disclosure Document, the post-term restriction prevents a franchisee from engaging in competitive activities within a specific geographic area. For two years after the franchise agreement expires or is terminated, the franchisee, or any restricted party, is prohibited from having any ownership interest in, lending money to, providing services to, or being employed by any competitor. This restriction applies within five miles of the franchisee's territory or the territory of any other Crown Gold Exchange business operating on the date of termination or transfer.
If the franchise agreement is terminated before the territory is determined, the non-competition area will be the Development Area and the territory of any other Crown Gold Exchange business operating on the date of termination. This means that the geographic scope of the restriction is tied to either the defined territory or, in the absence of a defined territory, the broader development area.
It is important to note that the agreement specifies that if a restricted party fails to comply with these obligations during the restrictive period, the period will be extended by one day for each day of noncompliance. This clause serves as an additional deterrent against violating the non-compete terms. Franchisees should carefully consider these restrictions and their potential impact on future business opportunities after the termination or expiration of their franchise agreement.