Can a Hawaiian Bros Island Grill franchisee circumvent the non-compete agreement through a relative or affiliate?
Hawaiian_Bros_Island_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
franchisee or licensee (with Company's authorization) operates, either permanently, temporarily or seasonally, and (ii) any other Hawaiian Bros Restaurant owned or operated by Franchisee or its Affiliate(s) in the Territory at any time during the Term of this Agreement, notwithstanding any future change to the owner or operator of such Hawaiian Bros Restaurant.
- (c) The Territory will in all cases be deemed to exclude any and all Non-Traditional Venues physically located within the Territory, meaning that all such Non-Traditional Venues will not be deemed to be a part of the definition of the Territory, Franchisee may not operate at such Non-Traditional Venues, and there are no restrictions whatsoever on Company's activities in or at those Non-Traditional Venues, including, but not limited to, its right to operate and grant others the right to engage in foodservice operations under the Marks at such Non-Traditional Venues.
- (d) Nothing contained in this Section 4 will prohibit or restrict Company, its Affiliates or its licensees from engaging in the distribution of proprietary sauces, shirts or other memorabilia, food or merchandise, whether or not identified by or associated with the Hawaiian Bros Island Grill brand name or logo, to or through commercial establishments that are not affiliated with Company or associated with the System, including (for example) department stores or supermarkets. Company and its Affiliates may exercise their distribution rights, both inside and outside the Territory.
- (e) Nothing contained in this Section 4 will prohibit or restrict Company, its Affiliates or its licensees from selling proprietary sauces, shirts or other memorabilia, food or merchandise to customers inside the Territory through catalogues, telemarketing campaigns, an Internet Website and other directorder techniques. Company, its Affiliates or its licensees may distribute sales solicitation materials in the Territory and broadcast television and radio commercials for direct-order merchandise into the Territory, without being deemed to infringe Franchisee's competitive protection rights.
Source: Item 23 — RECEIPTS (FDD pages 77–262)
What This Means (2025 FDD)
According to the 2025 Hawaiian Bros Island Grill FDD, the non-compete agreement extends to the franchisee's affiliates. Specifically, the definition of the territory includes any Hawaiian Bros Restaurant owned or operated by the franchisee or its affiliates. This means that the restrictions apply not only to the franchisee directly but also to any business entities or individuals closely associated with them, such as subsidiaries, parent companies, or partners.
This provision prevents a franchisee from circumventing the non-compete agreement by having a related party operate a competing Hawaiian Bros Island Grill restaurant within the restricted territory. The clause ensures that the franchisee cannot use an affiliate to bypass the obligations and restrictions outlined in the franchise agreement. This protection is crucial for maintaining the integrity of the franchise system and protecting the brand's market position.
However, the FDD also outlines specific exceptions to these territorial protections. For example, Hawaiian Bros Island Grill retains the right to operate or grant others the right to operate at non-traditional venues within the franchisee's territory. Additionally, Hawaiian Bros Island Grill and its affiliates can distribute proprietary items through commercial establishments not affiliated with the system and sell merchandise through direct-order techniques like catalogs or websites, even within the franchisee's territory. These exceptions highlight that while the franchisee has certain protections, Hawaiian Bros Island Grill maintains significant flexibility in its operations and distribution channels.