Does the post-term restriction for Endless Summer Sweets apply after a transfer of the franchise?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
- (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,
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to the 2024 Endless Summer Sweets Franchise Disclosure Document, the post-term non-compete restriction does apply after a transfer of the franchise. Specifically, the franchise agreement states that the restriction applies for two years after the agreement expires or is terminated for any reason, or where applicable, for two years after a transfer. This means that if a franchisee transfers their Endless Summer Sweets franchise to another party, the post-term non-compete restrictions will apply to the transferring franchisee for a period of two years from the date of transfer.
This non-compete restriction prevents the franchisee, any owner, or any spouse of an owner from engaging in any competitive business. This includes operating, having ownership in, lending money to, providing services to, or being employed by a competitor. The restriction applies to any competitor located at the premises of the former Endless Summer Sweets location or within a 25-mile radius of the franchisee's location or any other Endless Summer Sweets location.
For a prospective Endless Summer Sweets franchisee, this clause is important to consider when planning an exit strategy. If a franchisee sells their business, they will be restricted from engaging in a similar business within the specified area for two years. This could limit their future business opportunities and should be carefully evaluated before deciding to invest in an Endless Summer Sweets franchise. The franchisee should consult with a legal professional to fully understand the implications of this non-compete clause.