After the termination or expiration of an Extreme Art Studio franchise, what is the geographic scope of the non-competition covenant?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in Franchise Agreement and Multi-Franchise Addendum | Summary | |
|---|---|---|---|
| (m) | Conditions for franchisor approval of transfer | Section 12.3 | Written notice; provide us opportunity to exercise right of first refusal; transferee qualifies; you are not in default; transferee is not a direct competitor; landlord consents to assignment of lease for your Studio; we approve terms of transfer; subordinate; transferor and owners sign non-competition agreement; payment of transfer fee; transferor signs general release; transferee signs successor franchise agreement; refurbish Extreme Art Studio Business; transferee successfully completes training program; reimbursement of broker fees, if any; and others. |
| (n) | Franchisor's right of first refusal to acquire franchisee's business | Section 12.6 | We have a 30-day right of first refusal and can match offers. |
| (o) | Franchisor's option to purchase franchisee's business | Not applicable | Upon expiration or termination, we can buy all or part of your assets. |
| (p) | Death or disability of franchisee | Section 12.7 | Upon death or disability of you (or your Operating Owner), your (or your Operating Owner's) executor or personal representative must transfer the ownership interest within six months of date of death or disability. We may appoint an interim manager to operate your Extreme Art Studio Business during the transfer. |
| (q) | Non-competition covenants during the term of the franchise | Section 7 | No ownership interest in or performing services for a competitive business located anywhere; no interference with our or our affiliates or franchisees' relationships with any Extreme Art customers, vendors, or clients; and no engagement in any other activity injuring the goodwill of the Marks and the System, subject to applicable state law. |
| (r) | Non-competition covenants after the franchise is terminated or expires | Sections 15.4 and 15.5 | Prohibitions on diverting business to competitors; involvement in any competing business for two years and: (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, subject to applicable state law. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 43–46)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, if the franchise agreement is terminated or expires, the franchisee is subject to a non-competition covenant. This covenant restricts the franchisee from involvement in any competing business for two years.
The geographic scope of this restriction extends to two specific areas. First, it includes a 25-mile radius around each Extreme Art Studio Business that the franchisee operated under the Franchise Agreement. Second, it covers a 25-mile radius around any other Extreme Art Studio Business that is either open or under development as of the date the Franchise Agreement terminates or expires.
It is important to note that these non-competition covenants are subject to applicable state law, which may impact their enforceability. A prospective franchisee should carefully consider the implications of these restrictions before entering into a franchise agreement with Extreme Art Studio.