For a Noodles & Company franchisee, what is the duration of the non-competition covenant after the franchise is terminated or expires?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
| q. Non-competition covenants during the term of the franchise | Section 7.02 | Except for a 5.0% or less ownership interest in a publicly traded company, you may not directly or indirectly own or have any legal or beneficial interest in or render services or give advice to any competitive business located in the United States. A competitive business is any business that operates or franchises one or more restaurants: (1) whose sales of Specified Dishes (as defined below) collectively constitute more than 10.0% of restaurant operating revenues; (2) that are the same as, or substantially similar to, the Noodles & Company concept as it evolves or changes over time; or (3) that operate in a fast casual or quick casual format. As used in this Agreement, "Specified Dishes" means noodle dishes, pasta dishes, Asian dishes, Italian or Mediterranean dishes and any other dishes that are the same or substantially similar to the dishes on the Noodles & Company menu ("Noodles & Company Dishes") as it may evolve or change over time. |
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| r. Non-competition covenants after the franchise is terminated or expires | Section 7.03 | For 2 years after termination or expiration and except for a 5.0% or less ownership interest in a publicly traded company, you may not own, or have any legal or beneficial interest in, or render services or give advice to, any competitive business, as described above in q. in any Designated Market Area (as defined by Nielsen Media Research) where any Noodles & Company restaurant is located. Noodles & Company may, in its discretion, exclude from this clause certain competitive businesses approved by Noodles & Company at the time of execution of your Area Development Agreement and Franchise Agreements or approved subsequent to the execution of those agreements. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 63–83)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, a franchisee is subject to a non-competition covenant for a period of two years after the termination or expiration of their franchise agreement. This restriction prevents the franchisee from engaging in any competitive business during that time.
The non-competition covenant restricts a former Noodles & Company franchisee from owning, having any legal or beneficial interest in, or providing services or advice to any competitive business. A competitive business is defined as one that operates or franchises restaurants with significant sales of specified dishes (noodle, pasta, Asian, Italian, or Mediterranean dishes) or that closely resembles the Noodles & Company concept in a fast-casual or quick-casual format. This restriction applies within any Designated Market Area (as defined by Nielsen Media Research) where a Noodles & Company restaurant is located.
However, there are exceptions to this non-competition covenant. A franchisee can hold a 5.0% or less ownership interest in a publicly traded company without violating the covenant. Additionally, Noodles & Company retains the discretion to exclude certain competitive businesses from this clause, either at the time of signing the Area Development Agreement and Franchise Agreements or at a later date. This provides some flexibility, potentially allowing franchisees to engage in businesses that Noodles & Company deems non-threatening.
This type of non-compete agreement is common in the franchise industry to protect the brand and trade secrets of the franchisor. Prospective Noodles & Company franchisees should carefully consider the implications of this restriction, especially if they plan to remain in the restaurant industry after leaving the Noodles & Company system. They should also seek clarification from Noodles & Company regarding any potential exclusions or modifications to the non-competition agreement.