Does the Desi District non-compete agreement apply to the spouse of an owner?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
13.2 Covenants Not to Compete.
- (a) Restriction In Term. During the term of this Agreement, neither Franchisee, any Owner, nor any spouse of an Owner (the "Restricted Parties") 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.
- (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 Desi District 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 noncompetition will the Development Area and the territory of any other Desi District 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 Desi District Franchise Group. Franchisee agrees that the existence of any claim it may have against Desi District Franchise Group shall not constitute a defense to the enforcement by Desi District Franchise Group 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 page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, the non-compete agreement does apply to the spouse of an owner. During the term of the franchise agreement, the franchisee, any owner, and any spouse of an owner are considered "Restricted Parties" and are restricted from having any ownership interest in, lending money or providing financial assistance to, providing any services to, or being employed by any competitor.
Following the expiration or termination of the franchise agreement, this restriction continues for two years. During this post-term period, no Restricted Party can 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 the franchisee's territory or the territory of any other Desi District business operating on the date of termination or transfer. If the territory is not yet determined when the agreement is terminated, the non-competition area will be the Development Area and the territory of any other Desi District business.
If a Restricted Party fails to comply with these non-compete obligations, the restrictive period is extended by an additional day for each day of noncompliance. This broad application of the non-compete agreement to spouses is relatively common in franchising, as it aims to prevent individuals closely associated with the franchisee from using inside knowledge to benefit a competing business. Prospective franchisees should carefully consider these restrictions and discuss any concerns with Desi District before signing the Franchise Agreement.