After the Dq Treat franchise is terminated or expires, what are the geographic limits of the non-competition covenant for a Street location?
Dq_Treat Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in franchise agreement | Summary |
|---|---|---|
| r. Non-competition covenants after the franchise is terminated or expires | Section 14.6 | No direct or indirect involvement in a Competitive Business within: 500 meters of the authorized location for one year after termination or expiration for Street location; or within same building or venue for Captive- venue location. |
Source: Item 16 — UItem 16U***:** U**Restrictions on What the Franchisee May Sell (FDD pages 51–55)
What This Means (2025 FDD)
According to the 2025 Dq Treat Franchise Disclosure Document, if the franchise is terminated or expires, the franchisee is subject to a non-competition covenant. For a Street location, this covenant restricts the franchisee from direct or indirect involvement in a Competitive Business within 500 meters of the authorized location for one year after the termination or expiration of the franchise agreement. A Competitive Business is defined as any quick service restaurant that serves hamburgers but does not serve alcohol, or a business that generates more than 10% of its revenue from sales of ice cream, yogurt, frozen custard, fruit-based beverages, soft-serve, or other frozen treats.
This means that after leaving the Dq Treat system, a former franchisee operating a Street location cannot open or be involved with a similar business that competes with Dq Treat within a 500-meter radius for a period of one year. This restriction aims to protect Dq Treat's market share and customer base by preventing former franchisees from leveraging their experience and knowledge gained while operating a Dq Treat franchise to directly compete with the brand in close proximity.
The non-compete clause varies based on the location type. For Captive-venue locations, the restriction is limited to the same building or venue, which is a much smaller geographic area than the 500-meter radius applied to Street locations. This difference likely reflects the unique market dynamics of each location type, with Captive-venue locations having a more limited and defined customer base within a specific venue.
Prospective franchisees should carefully consider the implications of this non-competition covenant, especially if they plan to remain in the food service industry after their franchise agreement ends. Understanding the scope and duration of the restriction is crucial for future business planning and to avoid potential legal issues with Dq Treat.