Legal Question in Business Law in New York
One of my friend is a franchise of food service company. One fact of their agreement is: Franchisee acknowledges that franchisor enter into this agreement in consideration of, and reliance on franchisee's agreement to deal exclusively with franchisor and to refrain from using any of Franchisor's trade secrets in any activity competitive with franchisor, and to refrain from transferring the goodwill associated with the marks to any other business . Therefore, during the term of this agreement , franchisee and collectively and individually all director, officers and holders of any direct or indirect beneficial ownership interest of five percent or more of the securities or other equity interests of Franchisee or of any corporation, limited liability company, partnership or other form of entity affiliated with or directly or indirectly controlling or controlled by franchisee and each relative of each such person who s individual , including each such person's mother,father,husband,wife,brother,sister, son or daughter (collectively "Covered Persons"), shall not have any interests as an owner of,investor,partner,lender, director, officer, member, manager, employee, consultant, representative or agent or in any other capacity in any business selling Asian style food, sushi or fresh fish products, steamed foods or any other retail food retail food business without franchisor's prior written consent. For 2 years after this agreement expires without renewal or terminates, Franchisee and all Covered Persons shall not have any interest as an owner of,investor,partner,lender, director, officer, member, manager, employee, consultant, representative or agent or in any other capacity in any business selling Asian style food, sushi or fresh fish products, steamed foods or any other retail food retail food business without franchisor's prior written consent within:
A. 5 miles of any food service counter operated by Franchisor or by any franchisee or licensee or other affiliate of franchisor in a major city (as defined below);
B. 10 miles of any food service counter operated by franchisor or by any franchisee or licensee or other affiliate of franchisor in metropolitan area(as defined below);
C. 15 miles of any food service counter operated by franchisor or by any franchises or licensee or other affiliate of franchisor in a rural area (as defined below).
D. For this agreement, a "major city" means any of the top 25 cities in the U.S. measured by population; a "metropolitan city" means any city other than a major city where the population density is greater than 1000 people per square mile; and "rural area" means an area whose population density is 1000 per square miles or less. These figures shall be measured at the time of expiration or termination.
E. On written request from franchisee, Franchisor will provide Franchisee a list of locations within a reasonable geographic area, to assist Franchisee in complying with this obligation.
I would like to ask a question . His wife want to work at my food service counter which franchise of another same food company. How can effect to my friend franchise business and his wife by law ?
1 Answer from Attorneys
Generally speaking,
The type of restrictive agreement you reference is called a non-compete. In New York State non-compete agreements are permitted but they have to be reasonable within the context of what is being restricted and the person. To answer whether your friend's wife is in line with what the agreement refers to as a "covered person" and therefore subject to this restriction, the wife's role in your friend's business would need to be reviewed, as well as the ownership and management structure of the company through which your friend operates the franchise, the manner in which they file taxes and the nature of the work she would be doing at your place.
Basically the relevant docs need to be reviewed to answer whether your friend's wife is a "covered person" and therefore can she work at your operations. This should be a relatively short and inexpensive review.
Feel free to ping me off line for help in this matter.
Roman R. Fichman, Esq.
www.TheLegalists.com │ @TheLegalist
email: Info (@) TheLegalists (dot) com
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