What non-competition covenant must the seller and their owners execute when transferring a Noodles & Company franchise?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
- (k) you and your Owners must execute a non-competition covenant, in form and substance satisfactory to us, in favor of us and the transferee agreeing that, for a period of two years, starting on the effective date of the Transfer, you and your Owners will not directly or indirectly (such as through members of his/her or Immediate Families) own any legal or beneficial interest in, or render services or give advice to: (1) any Competitive Business; or (2) any entity which grants franchises, licenses or other interests to others to operate any Competitive Business in any Designated Market Area (as defined by Nielsen Media Research) where a Noodles & Company Restaurant is located, whether Company-owned or franchised, or within any area that is or was within an Area Development Area or a Protected Area, as those terms are defined in the Area Development Agreement and this Agreement;
Source: Item 23 — RECEIPT (FDD pages 99–350)
What This Means (2025 FDD)
According to the 2025 Noodles & Company Franchise Disclosure Document, when transferring a franchise, both the seller and their owners must execute a non-competition covenant. This covenant is made in favor of Noodles & Company and the new transferee.
The non-competition agreement restricts the seller and their owners from directly or indirectly engaging in competitive business activities for two years, starting from the transfer date. This includes owning any legal or beneficial interest in, or providing services or advice to, any Competitive Business. It also extends to entities that grant franchises, licenses, or other interests to operate any Competitive Business within a Designated Market Area (as defined by Nielsen Media Research) where a Noodles & Company restaurant is located, whether company-owned or franchised. The restriction also applies to areas that are or were within an Area Development Area or a Protected Area, as defined in the Area Development Agreement and Franchise Agreement.
This non-compete agreement ensures that the seller and their owners do not leverage their prior knowledge and experience to compete with the transferred Noodles & Company franchise. The definition of "Competitive Business" is defined in the agreement as any business that operates or franchises one or more restaurants: (1) whose sales of Specified Dishes (as defined below) collectively constitute more than 10% 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.