Does the Endless Summer Sweets Franchise Agreement contain any clauses about non-competition?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
erwise reproduce any Confidential Information, and (f) promptly report any unauthorized disclosure or use of Confidential Information. Franchisee acknowledges that all Confidential Information is owned by Franchisor (except for Confidential Information which Franchisor licenses from another person or entity). This Section will survive 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. Franchisee agrees that the existence of any claim it may have against Franchisor shall not constitute a defense to the enforcement by Franchisor of the covenants of this Section. If a Restricted Party fails to comply with the obligations under this Section during the restrictive period, then the restrictive period will be extended an additional day for each day of noncompliance.
- 13.3 General Manager and Key Employees. If requested by Franchisor, Franchisee will cause its general manager and other employees to sign Franchisor's then-current form of confidentiality and non-compete agreement.
**ARTICLE 13.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to the 2024 Endless Summer Sweets Franchise Disclosure Document, the Franchise Agreement contains covenants not to compete that apply both during the term of the agreement and after its expiration or termination. During the term, the franchisee, any owner, or any spouse of an owner cannot have any involvement with a competitor, including ownership, lending money, providing services, or being employed by one.
After the agreement expires or is terminated, these restricted parties are prohibited for two years from being involved with a competitor located at the Endless Summer Sweets premises or within a 25-mile radius of the franchisee's location or any other Endless Summer Sweets location. The franchisee agrees that this two-year period and 25-mile radius are reasonable to protect Endless Summer Sweets. The non-competition period does not accrue during any time the franchisee is in violation of the covenant. 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.
Additionally, the general manager and other key employees may be required to sign a confidentiality and non-compete agreement. The FDD also states that if the franchisee is a corporation, limited liability company, or other entity, each owner of the franchise entity must sign a Guaranty and Non-Compete Agreement, which means that all of the franchise agreement's provisions will also apply to the owners. The Franchise Agreement provides for termination upon bankruptcy, but this provision may not be enforceable under federal bankruptcy law. The Franchise Agreement contains a covenant not to compete which extends beyond the termination of the franchise, but this provision may not be enforceable under California law.