Are the non-competition covenants in the Extreme Art Studio Owners Agreement considered independent of other provisions?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
15.5 CONTINUING OBLIGATIONS. All of our and your (and your owners') obligations which expressly or by their nature survive this Franchise Agreement's expiration or termination will continue in full force and effect subsequent to and notwithstanding its expiration or termination, and until they are satisfied in full or by their nature expire.
16. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
Based on the 2024 Extreme Art Studio Franchise Disclosure Document, the agreement states that all obligations that survive the termination or expiration of the Franchise Agreement will continue in full force and effect until they are fully satisfied or naturally expire. This includes the non-compete covenants outlined in Section 15.4 of the agreement.
Specifically, upon termination or expiration of the Franchise Agreement, the franchisee and their owners agree not to have any direct or indirect interest in a Competitive Business within a 25-mile radius of any Extreme Art Studio Business they operate or any other Extreme Art Studio Business that is open or under development. This restriction applies for two years, beginning on the effective date of termination or expiration, or the date on which all persons restricted begin to comply with this section, whichever is later. The agreement also clarifies that these restrictions apply after transfers, as detailed in Section 12.3.2(m).
The FDD also addresses the enforceability of the non-compete agreement. If a court determines that the two-year post-term restrictive period is too long to be enforceable, the period will be reduced to one year from the termination, expiration, or transfer of the Franchise Agreement. This demonstrates that Extreme Art Studio has considered the possibility of judicial review and has included a provision to ensure the covenant remains enforceable to the greatest extent possible.
Prospective franchisees should note that the non-compete obligations are designed to protect Extreme Art Studio's interests and prevent former franchisees from using confidential information or relationships to compete with the brand. Franchisees should carefully consider the implications of these restrictions before entering into a franchise agreement, particularly if they plan to remain in the same geographic area after the franchise term ends.