Who is subject to the covenant not to compete for a Golden Krust Caribbean Restaurant franchise?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
Upon
- (1) our termination of this Agreement in accordance with its terms and conditions,
- (2) expiration of this Agreement (if we offer, but you elect not to acquire, a successor franchise), or
- (3) your sale or transfer of the Restaurant pursuant to the provisions of Section XII.B hereof, you and your owners agree that, for a period of two (2) years commencing on the effective date of termination or expiration or the date on which a person restricted by this Paragraph begins to comply with this Paragraph, whichever is later, neither you nor any of your owners will have any direct or indirect interest (e.g., through a spouse or child) as a disclosed or beneficial owner, investor, partner, director, officer, employee, consultant, representative or agent or in any other capacity in any Competitive Business (as defined in Section VII above) operating
- (a) at the Premises;
- (b) within ten (10) miles of the Premises; or
- (c) within five (5) miles of any other Golden Krust Restaurant in operation or under construction on the later of the effective date of the termination or expiration or the date on which a person restricted by this Section complies with this Section.
If any person restricted by this Section refuses voluntarily to comply with the foregoing obligations, the two (2) year period will commence with the entry of an order of an arbitrator, or Court if necessary, 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 such skills. Consequently, enforcement of the covenants made in this Section will not deprive you of your personal goodwill or ability to earn a living.
If we find it necessary to enforce the provisions of Section XVI, you acknowledge that the Court has the power to enjoin you, your officers, agents, servants, employees and all others in active concert or participation with you.
Source: Item 22 — CONTRACTS (FDD page 35)
What This Means (2024 FDD)
According to the 2024 Golden Krust Caribbean Restaurant Franchise Disclosure Document, both the franchisee and their owners are subject to a covenant not to compete. This covenant is triggered upon (1) termination of the Franchise Agreement by Golden Krust Caribbean Restaurant, (2) expiration of the agreement if the franchisee declines a successor franchise, or (3) the sale or transfer of the restaurant by the franchisee.
The covenant restricts the franchisee and their owners from holding any direct or indirect interest in a Competitive Business. This includes roles such as owner, investor, partner, director, officer, employee, consultant, representative, or agent. The restriction applies to businesses operating at the original premises, within a 10-mile radius of the premises, or within a 5-mile radius of any other Golden Krust Caribbean Restaurant that is either operating or under construction.
The non-compete period lasts for two years, starting from the termination or expiration date, or the date the restricted party begins complying with the covenant, whichever is later. If someone refuses to comply voluntarily, the two-year period begins when an arbitrator or court order enforces the provision. Golden Krust Caribbean Restaurant emphasizes that this restriction will not deprive franchisees of their ability to earn a living, as they possess general skills and abilities applicable to other opportunities.
Golden Krust Caribbean Restaurant also has the power to seek a court order to prevent non-compliance with the non-compete agreement, which could apply to the franchisee, their officers, agents, employees, and anyone actively working with them. This clause ensures that franchisees and their owners cannot leverage the knowledge and experience gained from the Golden Krust Caribbean Restaurant system to directly compete against the franchise after the agreement ends.