Who is subject to the covenant not to compete after termination or expiration of an Extreme Art Studio Franchise Agreement?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
- 15.4.1 Upon termination or expiration of this Franchise Agreement, you and your owners agree that, for two years beginning on the effective date of termination or expiration, or the date on which all persons restricted by this Section 15.4 begin to comply with this Section 15.4, whichever is later, neither you nor any of your owners (or their immediate family members) will have any direct or indirect interest as an owner (whether of record, beneficially or otherwise), investor, partner, director, officer, employee, consultant, representative or agent in any Competitive Business located or operating:
- (a) within a 25-mile radius of each Extreme Art Studio Business that you operate under this Franchise Agreement; and
- (b) within a 25-mile radius of any other Extreme Art Studio Business that is either open or under development as of the date of termination or expiration of this Franchise Agreement.
- 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.
- 15.4.3 If a court of competent jurisdiction determines that the two-year post-term restrictive period set forth above is too long to be enforceable, then the post-term restrictive period above shall be for a period of one year from the termination, expiration or transfer of this Franchise Agreement.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, upon termination or expiration of the Franchise Agreement, both the franchisee and their owners are subject to a covenant not to compete. This restriction lasts for two years, beginning either on the termination or expiration date, or the date when all restricted individuals begin complying with the covenant, whichever is later.
The covenant prevents the franchisee and their owners (including their immediate family members) from holding any direct or indirect interest in a Competitive Business. This includes being an owner, investor, partner, director, officer, employee, consultant, representative, or agent. The restriction applies to businesses located or operating within a 25-mile radius of any Extreme Art Studio Business the franchisee operates, as well as within a 25-mile radius of any other Extreme Art Studio Business that is either open or under development at the time of termination or expiration.
Extreme Art Studio clarifies that these restrictions also apply after transfers of the franchise. If any individual subject to the non-compete refuses to comply voluntarily, the two-year period begins upon a court order enforcing the provision. The agreement emphasizes that the franchisee and their owners possess general skills and abilities, and enforcing the non-compete will not deprive them of their personal goodwill or ability to earn a living. If a court finds the two-year restriction too long, it will be reduced to one year from the termination, expiration, or transfer date.