Under what circumstances can a Dog Haus Area Developer operate a Competitive Business at a Franchised Location after the termination of the Area Developer Agreement?
Dog_Haus Franchise · 2025 FDDAnswer from 2025 FDD Document
Except as Franchisor otherwise approves in writing, commencing upon the date of: (i) an Assignment permitted under Article 9; (ii) the Expiration Date of this Agreement; (iii) the termination of this Agreement (regardless of the cause for termination); or (iv) a final court order (after all appeals have been taken) with respect to any of the foregoing events or with respect to enforcement of this Section 13.3, and continuing for an uninterrupted period of two (2) years thereafter, Area Developer and each Owner shall not, own (either beneficially or of record), engage in or render services to, whether as an investor, partner, lender, director, officer, manager, employee, consultant, representative or agent, any Competitive Business located at a location designated as a "Franchised Location" in a Franchise Agreement between Franchisor, as franchisor, and Area Developer, or an Affiliate or Owner of Area Developer, as franchisee, except in accordance with the terms of an effective Franchise Agreement between Franchisor, as franchisor, and Area Developer, or an Affiliate or Owner of Area Developer, as franchisee, or any location within a two (2) mile radius of any Dog Haus Restaurant or a Franchised Location as defined above; provided, however, the restrictions stated in this Section 13.3 shall not apply to any Owner after two (2) years from the date the Owner ceases to be an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or otherwise associated in any capacity with Area Developer in the Development Area.
- 13.4 Exceptions to Non-Compete Covenants.
Sections 13.2 and 13.3 shall not apply to ownership by Area Developer or an Owner of a less than five percent (5%) beneficial interest in the outstanding equity securities of any Competitive Business registered under the Securities Act of 1833 or the Securities Exchange Act of 1834.
Source: Item 23 — RECEIPTS (FDD pages 87–328)
What This Means (2025 FDD)
According to Dog Haus's 2025 Franchise Disclosure Document, an Area Developer is restricted from operating a Competitive Business at a Franchised Location after the termination of the Area Developer Agreement. Specifically, after the termination, expiration, or assignment of the Area Developer Agreement, the Area Developer and each Owner are prohibited from owning, engaging in, or rendering services to any Competitive Business located at a Franchised Location. This restriction applies for two years following the termination date. A Franchised Location is defined as a location designated as such in a Franchise Agreement between Dog Haus and the Area Developer (or their affiliate/owner). The non-compete also extends to any location within a two-mile radius of a Dog Haus Restaurant or Franchised Location.
However, there are exceptions to this non-compete covenant. The restrictions do not apply if Dog Haus provides written approval. Additionally, the non-compete does not apply to an Owner after two years from the date they cease to be associated with the Area Developer. Furthermore, the non-compete covenants do not apply to ownership by the Area Developer or an Owner of less than 5% of the equity securities of any Competitive Business registered under the Securities Act of 1833 or the Securities Exchange Act of 1834.
In practical terms, this means that if a Dog Haus Area Developer's agreement is terminated, they generally cannot immediately open a competing restaurant at a location that was previously a Dog Haus franchise or within a two-mile radius. This restriction is in place to protect the Dog Haus brand and market share. However, the Area Developer could potentially operate a competing business at a Franchised Location if they obtain written approval from Dog Haus or if they own a small, passive stake (less than 5%) in a publicly traded competitor. After two years, the Area Developer is free to operate a competing business without these restrictions.