What actions are prohibited under the non-competition covenants during the term of the Devon Creek franchise?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
| Section in | |||
|---|---|---|---|
| Franchise | |||
| Provision | Agreement | Summary | |
| n. | Franchisor's right of first refusal to acquire franchisee's business | Section 16.6 | Summary You must promptly notify us of any written offer to purchase your Franchise. We have fifteen (15) days to exercise our first right to buy it on the same terms and conditions, provided that (a) we may substitute cash for any other consideration, (b) we may pay the entire purchase price at closing, (c) our credit is deemed as good as the proposed purchaser, |
| Enoughison's oution to muchoso | Section 18.2 | (d) we have at least thirty (30) days to close and (e) you shall give us all customary seller's representations and warranties. | |
| 0. | Franchisor's option to purchase franchisee's business | Upon termination of the Franchise Agreement, we have the option to purchase your equipment, signs, advertising materials, supplies and inventory at your cost or fair market value, whichever is less. | |
| p. | Death or disability of franchisee | Sections 16.3, 16.4 and 16.7 | The Franchise Agreement will terminate automatically upon your death or permanent disability, unless prohibited by law and the Franchise is transferred within three (3) months to a replacement franchisee that we approve. |
| q. | Non-competition covenants during the term of the franchise | Section 19.5.1 | You may not: divert, or attempt to divert, customers or referral sources of any Devon Creek outlet (including yours) to any competitor, participate in any capacity, including, but not limited to as an owner, investor, officer, director, employee, or agent, in any competing business; do any act that could damage the goodwill of the Marks or System, or disrupt or jeopardize our business or that of our franchisees. Subject to state law. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 37–42)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, during the term of the franchise agreement, franchisees are subject to non-competition covenants that restrict certain activities. Specifically, a franchisee may not divert or attempt to divert customers or referral sources from any Devon Creek outlet, including their own, to a competitor.
Furthermore, franchisees are prohibited from participating in any capacity, such as an owner, investor, officer, director, employee, or agent, in any competing business. This restriction is broad and covers various forms of involvement in a competing entity.
Additionally, franchisees are barred from taking any action that could harm the goodwill of the Devon Creek Marks or System. They must also avoid any conduct that could disrupt or jeopardize the business of Devon Creek or its other franchisees. These non-competition covenants are subject to state law, which may impose additional requirements or limitations.
These restrictions are in place to protect Devon Creek's brand, customer base, and overall business interests. Prospective franchisees should carefully review Section 19.5.1 of the Franchise Agreement and any applicable state laws to fully understand the scope and limitations of these non-competition covenants during the franchise term.