Does the post-term non-compete restriction for Extreme Art Studio apply after a transfer of the franchise?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
- 15.4.2 These restrictions also apply after transfers, as provided in Section 12.3.2(m) above. If any person restricted by this Section 15.4 refuses voluntarily to comply with these obligations, the two-year period for that person will commence with the entry of a court order enforcing this provision. You and your owners expressly acknowledge that you possess skills and abilities of a general nature and have other opportunities for exploiting these skills. Consequently, our enforcing the covenants made in this Section 15.4 will not deprive you of your personal goodwill or ability to earn a living.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, the post-term non-compete restrictions do apply after a transfer of the franchise. Specifically, Section 15.4.2 states that these restrictions apply after transfers, referencing Section 12.3.2(m). This means that the obligations a franchisee has regarding not competing with Extreme Art Studio continue even if the franchise is sold or transferred to a new owner.
The non-compete agreement states that for two years after termination or expiration of the franchise agreement, the franchisee and their owners cannot have a direct or indirect interest in a Competitive Business within a 25-mile radius of the Extreme Art Studio they operated or any other Extreme Art Studio that is open or under development. This restriction is designed to protect Extreme Art Studio's market and prevent former franchisees from using the brand's confidential information and systems to compete against it.
This provision is significant for potential franchisees because it limits their business activities for a period of time after they leave the Extreme Art Studio system, even after transferring their franchise. If a franchisee or their owners violate this non-compete agreement, the two-year period for compliance begins when a court order enforces the provision. Additionally, if a court finds the two-year period too long, it can be reduced to one year. Prospective franchisees should carefully consider these restrictions and how they might impact their future business plans before investing in an Extreme Art Studio franchise.