For how long after the Desi District Franchise Agreement expires or is terminated does the post-term non-compete restriction apply to the Guarantor?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
This Section will survive the termination or expiration of the Franchise Agreement indefinitely.
3. Covenants Not to Compete.
- (a) Restriction In Term. During the term of the Franchise Agreement, Guarantor shall not 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.
- (b) Restriction Post Term. For two years after the Franchise Agreement expires or is terminated for any reason (or, if applicable, for two years after a Transfer by Guarantor), Guarantor shall not 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 located within five miles of Franchisee's Territory or the territory of any other Desi District business operating on the date of termination or transfer, as applicable.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, the Guarantor is subject to a post-term non-compete restriction for a period of two years after the Franchise Agreement expires or is terminated. This restriction also applies for two years after a Transfer by the Guarantor, if applicable.
During this two-year period, the Guarantor is prohibited from having any ownership interest in, lending money or providing financial assistance to, providing any services to, or being employed by any competitor. This restriction is limited to competitors located within five miles of the franchisee's territory or the territory of any other Desi District 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 Desi District business operating on the date of termination. The Guarantor also agrees that if they fail 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. This post-term covenant not to compete is a significant consideration for potential franchisees and their guarantors, as it restricts their ability to engage in similar business activities for a defined period after the franchise relationship ends.