What happens if a Hawaiian Bros Island Grill franchisee breaches the non-compete covenant?
Hawaiian_Bros_Island_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
(3) In addition, during the In-Term Restricted Period and the applicable Post-Term Restricted Period, neither Franchisee nor any Controlling Principal will, without Company's prior written consent, directly or indirectly, for itself, himself or herself, as applicable, or on behalf of any other Person, solicit, serve, cater to, divert or attempt to divert to a Competitive Business, any business or customer of the Franchised Restaurant or any other Hawaiian Bros Restaurant, by direct or indirect inducement or otherwise.
For purposes of calculating the duration of the two-year period, any time during which Franchisee or any Controlling Principal is in violation or breach of the covenant will be excluded. "Competitive Business" means any island-inspired or Hawaiian-themed restaurant or restaurant that advertises and serves Hawaiian cuisine.
- (b) In order to give effect to Franchisee's and its Controlling Principals' obligations in this Section 18, Franchisee acknowledges and agrees that neither it nor any of its Controlling Principals will seek to violate this Section 18 directly or through any other person (for example, a direct relative or Affiliate) with whom Franchisee or the Controlling Principals are acting in concert or participating in connection with the prohibited activities.
Franchisee and its Controlling Principals will be deemed to be in violation of the restrictions contained in this Section 18 if an Affiliate or direct relative such as a spouse, sibling, parent, child, or in-law is engaging in the activities described by this Section.
(c) Franchisee and its Controlling Principals acknowledge that their covenant not to compete is reasonable and necessary to protect the business and goodwill of the System and to avoid misappropriation or other unauthorized use of the System and Company's other Trade Secrets.
(d) Franchisee and its Controlling Principals acknowledge and confirm that they possess the education, training and experience necessary to earn a reasonable livelihood apart from operating or serving a Competitive Business.
Source: Item 23 — RECEIPTS (FDD pages 77–262)
What This Means (2025 FDD)
According to the 2025 FDD, if a Hawaiian Bros Island Grill franchisee violates the non-compete agreement, any time during which the franchisee is in violation will be excluded from the calculation of the two-year restricted period. This means the clock effectively stops on the non-compete duration while the franchisee is in breach, extending the overall period during which the restrictions apply. The non-compete agreement applies not only to the franchisee but also to any Controlling Principal involved in the franchise.
Furthermore, Hawaiian Bros Island Grill emphasizes that franchisees and their Controlling Principals are prohibited from circumventing the non-compete obligations by acting through other individuals, such as direct relatives or affiliates. If an affiliate or direct relative (spouse, sibling, parent, child, or in-law) engages in activities that violate the non-compete terms, the franchisee and their Controlling Principals will be deemed in violation as well. This highlights the comprehensive nature of the non-compete agreement, designed to prevent any indirect means of competition.
Hawaiian Bros Island Grill also states that the franchisee acknowledges the non-compete covenant is reasonable and necessary to protect the business, goodwill of the system, and trade secrets. The franchisee also acknowledges they possess the education, training, and experience to earn a reasonable livelihood outside of a competitive business. This acknowledgement is likely intended to reinforce the enforceability of the non-compete agreement, addressing potential arguments that it unduly restricts the franchisee's ability to earn a living.