After a transfer of a Desi District franchise, how long does the post-term non-compete restriction last?
Desi_District 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 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.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a Desi District franchise is transferred to a new owner, a non-compete restriction applies to the previous franchisee. This restriction lasts for two years after the transfer.
During this two-year period, the previous franchisee, any owner, or their spouse 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 transferred Desi District franchise's territory or the territory of any other Desi District business operating on the date of the transfer.
If the franchise agreement is terminated before the territory is determined, the non-compete area will be the Development Area and the territory of any other Desi District business operating on the date of termination. This non-compete agreement aims to protect Desi District's market and confidential information by preventing former franchisees from using their knowledge to compete against the brand shortly after leaving the system.