What activities are Lees Famous Recipe franchisees prohibited from engaging in after the franchise agreement expires or is terminated regarding restaurant businesses at the former site of the Restaurant?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
i) own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in, or assist any person or entity engaged in any Competing Business (including any e-commerce or Internet-based business), except: (1) with our prior written consent; (2) if you own securities listed on a stock exchange or traded on the over-the-counter market that represent one percent (1%) or less of that class of securities; or (3) under a separate agreement between you and us.
- D. Post-Term Covenant Not to Compete. You (and the Operating Principal and each Principal Owner) will not, for a period of two (2) years after this Agreement expires or is terminated or the date on which you cease to operate the Restaurant, whichever is later, directly or as an employee, agent, consultant, partner, officer, director or shareholder of any other person, firm, entity, partnership or corporation: (1) divert or attempt to divert any business or customers of the Restaurant to any Competing Business or perform any act that would damage the goodwill associated with the Marks or the System; (2) own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in, or assist any person or entity engaged in any restaurant business which is located at the former site of the Restaurant and offers menu items similar to those offered at the Restaurant; or (3) own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in, or assist any person or entity engaged in any Competing Business that is located (i) at the former site of the Restaurant, (ii) within a five (5) mile radius of the former site of the Restaurant or any other then-existing Lee's Famous Recipe Restaurant, (iii) within the Designated Territory, or (iv) within a five (5) mile radius of the Designated Territory; provided, however, that this Section 13(D) will not apply to: (i) other Lee's Famous Recipe Restaurants that you operate under separate Lee's Famous Recipe franchise agreements; or (ii) the ownership of securities listed on a stock exchange or traded on the over-the-counter market that represent one percent (1%) or less of that class of securities.
- E. Injunctive Relief.
Source: Item 22 — CONTRACTS (FDD pages 69–70)
What This Means (2025 FDD)
According to the 2025 Lees Famous Recipe Franchise Disclosure Document, after the franchise agreement expires or is terminated, a franchisee is restricted from certain activities related to restaurant businesses at the former site. For a period of two years after the agreement ends or the franchisee ceases to operate the restaurant, whichever is later, the franchisee (including the Operating Principal and each Principal Owner) cannot directly or indirectly be involved with any restaurant business at the former site that offers menu items similar to those offered at the Lees Famous Recipe Restaurant. This includes being an employee, agent, consultant, partner, officer, director, or shareholder of any entity involved in such a competing business.
This restriction aims to prevent franchisees from leveraging the knowledge and experience gained while operating a Lees Famous Recipe franchise to directly compete with the brand immediately after the franchise agreement concludes. The non-compete clause extends not only to owning or operating a similar restaurant but also to assisting any person or entity engaged in such a business. This is a fairly standard practice in franchising to protect the brand and its established customer base.
In addition to the restrictions on operating a competing restaurant at the former site, the franchisee is also prohibited from engaging in or assisting any Competing Business that is located (i) at the former site of the Restaurant, (ii) within a five (5) mile radius of the former site of the Restaurant or any other then-existing Lee's Famous Recipe Restaurant, (iii) within the Designated Territory, or (iv) within a five (5) mile radius of the Designated Territory. There are exceptions to this, including other Lee's Famous Recipe Restaurants that you operate under separate Lee's Famous Recipe franchise agreements; or (ii) the ownership of securities listed on a stock exchange or traded on the over-the-counter market that represent one percent (1%) or less of that class of securities.
Lees Famous Recipe also retains the right to seek injunctive relief, without posting bond or security, if a franchisee violates the non-compete agreement, acknowledging that damages alone may not adequately compensate for the breach. This highlights the importance Lees Famous Recipe places on protecting its brand and market position, and the seriousness with which they view any potential violations of the non-compete covenants.