Can a 1 800 Packouts franchisee divert a potential customer to a Competitive Business during their association?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
You acknowledge that you will receive valuable, specialized training and confidential information regarding the operational, sales, promotional, and marketing methods of the 1-800-PACKOUTS concept. During the Term, you and your Owners will not, without our prior written consent, either directly or indirectly, for themselves, or through, on behalf of, or in conjunction with any other person or Entity (e.g., through an affiliate, spouse, child, or other relative):
- (1) own, manage, engage in, be employed by, advise, make loans to, or have any other interest in (a) any other business offering or providing services or products competitive with or similar to the services or products offered or provided by Franchised Businesses or (b) any business which franchises or licenses others to offer or provide such services or products (collectively, each, a "Competitive Business") at any location anywhere;
- (2) divert or attempt to divert any business or customer or potential business or customer of the Franchised Business to any Competitive Business, by direct or indirect inducement or otherwise;
- (3) perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System;
- (4) use any vendor relationship established through your association with us for any purpose other than to purchase products or equipment for use or retail sale in the Franchised Business; or
- (5) directly or indirectly solicit for employment any person who at any time within the immediate past 12 months has been employed by us, or our affiliates, or by any of our franchisees.
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to 1 800 Packouts's 2025 Franchise Disclosure Document, a franchisee is prohibited from diverting business to a competitive business during the term of the franchise agreement. This restriction is part of the covenants not to compete that a franchisee agrees to. This means that while operating a 1 800 Packouts franchise, the franchisee cannot actively direct or encourage customers or potential customers to use a competing service. This restriction applies to both direct and indirect methods of diverting business.
This non-compete clause ensures that franchisees remain committed to the 1 800 Packouts system and brand. It protects the company's market share and goodwill by preventing franchisees from using the knowledge and resources gained through the franchise to benefit a competing business. This restriction is in place to maintain the integrity of the 1 800 Packouts network and prevent unfair competition among franchisees.
For a prospective franchisee, this means they must be fully dedicated to the 1 800 Packouts business during the term of their agreement. They cannot operate a side business or have any active involvement with a competing business that could potentially take away customers from their 1 800 Packouts franchise. Violating this covenant could lead to legal action from the franchisor, including potential injunctive relief and damages.