Can a Devon Creek franchisee participate as an investor in a competing business during the term of the franchise?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
| Section in | |||
|---|---|---|---|
| Franchise | |||
| Provision | Agreement | Summary | |
| 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. |
| r. | Non-competition covenants after the franchise is terminated or expires | Section 19.5.2 | For twenty four (24) months after the termination of the Franchise Agreement, 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 within ten (25) miles of your former Devon Creek Territory or any other Devon Creek office location; 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 the 2024 Devon Creek Franchise Disclosure Document, franchisees are restricted from participating in competing businesses during the term of their franchise agreement. Specifically, a Devon Creek franchisee cannot divert customers to a competitor or participate in any capacity, including as an owner, investor, officer, director, employee, or agent, in any competing business. This restriction is subject to state law.
This non-compete clause is designed to protect Devon Creek's market position and goodwill. By preventing franchisees from engaging with competing businesses, Devon Creek aims to maintain a consistent brand experience and prevent the leakage of proprietary information or business strategies to competitors. This restriction applies to all Devon Creek outlets, not just the franchisee's own location.
After the franchise agreement terminates, a different set of non-compete restrictions apply. For 24 months post-termination, the franchisee cannot divert customers or participate in a competing business within 25 miles of their former Devon Creek territory or any other Devon Creek office location. These post-term restrictions, like the in-term restrictions, are subject to state law, meaning their enforceability can vary depending on the franchisee's location.
Prospective franchisees should carefully review Section 19.5 of the Devon Creek franchise agreement and any applicable state laws to fully understand the scope and limitations of these non-competition covenants. It is important to consider how these restrictions might impact future business opportunities, both during and after the franchise term.