What is the geographic scope of the post-term covenant not to compete for a Lees Famous Recipe franchisee?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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.
Source: Item 22 — CONTRACTS (FDD pages 69–70)
What This Means (2025 FDD)
According to the 2025 Lees Famous Recipe Franchise Disclosure Document, the post-term covenant not to compete restricts a franchisee (and their Operating Principal and each Principal Owner) for two years after the franchise agreement expires, is terminated, or the franchisee ceases to operate the restaurant, whichever is later.
The geographic scope of this restriction includes several layers. First, franchisees cannot operate a competing business at the former site of their Lees Famous Recipe restaurant. Second, they are restricted from operating a competing business within a five-mile radius of their former restaurant site. Third, the non-compete extends to the franchisee's Designated Territory. Finally, the restriction includes a five-mile radius around the Designated Territory or any other then-existing Lees Famous Recipe Restaurant. A "Competing Business" is defined as any restaurant offering similar menu items.
However, there are exceptions to this non-compete. The restrictions do not apply to other Lees Famous Recipe restaurants the franchisee operates under separate agreements, or to the ownership of publicly traded securities representing one percent or less of that class of securities. This post-term covenant aims to protect Lees Famous Recipe's market and brand integrity by preventing former franchisees from directly competing in close proximity to existing or former locations.