Can an Endless Summer Sweets franchisee or its owners be a direct or indirect owner of a competitor?
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.
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to the 2024 Endless Summer Sweets FDD, during the term of the franchise agreement, neither the franchisee, any owner, nor any spouse of an owner can 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. This restriction applies throughout the entire term of the agreement. This means that franchisees and their immediate family members are prohibited from engaging in any competitive business ventures while operating an Endless Summer Sweets franchise.
After the franchise agreement expires or is terminated, a similar restriction applies for two years. During this two-year period, the franchisee, owners, and their spouses are prohibited from operating, having any ownership interest in, lending money or providing financial assistance to, providing services to, or being employed by any competitor. This restriction applies to competitors located at the premises where the Endless Summer Sweets was located or within a 25-mile radius of the franchisee's location or any other Endless Summer Sweets location.
The FDD specifies that these non-compete covenants are considered independent of other provisions in the agreement. If any part of the non-compete agreement is deemed unenforceable, the intention is for a court or arbitrator to modify the restriction to protect the legitimate business interests of Endless Summer Sweets. Additionally, if a restricted party violates the non-compete obligations, the restrictive period will be extended by one day for each day of noncompliance. This ensures that Endless Summer Sweets can protect its market position and confidential information even after a franchise agreement ends.