What is the definition of 'reasonable area' regarding competition with an Endless Summer Sweets franchisee?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
the termination or expiration of this Agreement indefinitely.
13.2 Covenants Not to Compete.
- (a) Restriction In Term. During the term of this Agreement, neither Franchisee, any Owner, nor any spouse of an Owner (the "Restricted Parties or "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.
- (b) Restriction Post Term. For two years after this Agreement expires or is terminated for any reason or, where applicable, for two years after a Transfer, no Restricted Party shall directly or indirectly operate, have any ownership interest in, lend money or provide financial assistance to, provide any services to, or be employed by, any Competitor which is located at the premises upon which the Endless Summer Sweets is or was located or is located or within a twenty-five (25) mile radius of the Franchisee's location or any other Endless Summer Sweets location, whether owned by Franchisor or another Franchisee. Franchisee expressly agrees that the two-year period and the twentyfive (25) mile radius are the reasonable and necessary time and distance needed to protect Franchisor if this Agreement expires or is terminated for any reason. Franchisee agrees that the two-year time period of the non-competition provision shall not accrue during any time period that Franchise or any Restricted Party is in violation of this covenant. If this Agreement is terminated before the Territory is determined,
then the area of non-competition will the Development Area and the territory of any other Endless Summer Sweets business operating on the date of termination.
- (c) Interpretation. The parties agree that each of the foregoing covenants is independent of any other covenant or provision of this Agreement. If all or any portion of the covenants in this Section is held to be unenforceable or unreasonable by any arbitrator or court, then the parties intend that the arbitrator or court modify such restriction to the extent reasonably necessary to protect the legitimate business interests of Franchisor.
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to the 2024 Endless Summer Sweets FDD, a 'reasonable area' regarding competition is defined in the context of post-term non-compete restrictions. After the franchise agreement expires or is terminated, the franchisee, owners, and their spouses are restricted from engaging in any competitive business.
Specifically, this restriction applies for two years after the agreement ends. The restricted area includes the physical premises where the Endless Summer Sweets was located, or any location within a 25-mile radius of the franchisee's location or any other Endless Summer Sweets location, whether owned by the franchisor or another franchisee. This means a franchisee cannot operate or be involved with a competing business within this defined area for the specified duration.
The Endless Summer Sweets franchise agreement states that the franchisee acknowledges that the two-year period and the 25-mile radius are considered reasonable and necessary to protect the franchisor's interests if the agreement is terminated. If the agreement is terminated before the territory is determined, the non-competition area will be the Development Area and the territory of any other Endless Summer Sweets business operating on the date of termination.
It's also important to note that if any part of these non-compete covenants is deemed unenforceable or unreasonable by an arbitrator or court, the parties intend for the restriction to be modified to the extent necessary to protect the franchisor's legitimate business interests. Furthermore, any violation of the non-compete agreement will result in an extension of the restrictive period by one day for each day of noncompliance.