Can Endless Summer Sweets reject a proposed assignee if they are considered a competitor?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
- (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,
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
Based on the 2024 Endless Summer Sweets FDD, the franchise agreement contains covenants not to compete that restrict franchisees and related parties from engaging with competitors during the term of the agreement and for a period after the agreement expires or is terminated.
Specifically, 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. After the agreement expires or is terminated, this restriction extends for two years within a twenty-five (25) mile radius of the franchisee's location or any other Endless Summer Sweets location.
While the FDD excerpts discuss non-compete obligations, they do not explicitly state whether Endless Summer Sweets can reject a proposed assignee based on their status as a competitor. It is important for a prospective franchisee to seek clarification from Endless Summer Sweets regarding the specific conditions under which a transfer or assignment may be rejected, including whether competitive concerns are a factor.