Is a 360 Painting franchisee allowed to own stock in a publicly traded competitor?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
Neither Franchisee nor the other Bound Parties will be prohibited from owning securities in a Competitive Business if they are listed on a stock exchange or traded on the over-the-counter market and represent 3% or less of the number of shares of that class of securities which are issued and outstanding.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to 360 Painting's 2025 Franchise Disclosure Document, a franchisee is permitted to own securities in a publicly traded competitor under certain conditions. Specifically, this allowance applies if the competitor's securities are listed on a stock exchange or traded over-the-counter.
However, this permission is limited. The franchisee's ownership stake must represent 3% or less of the total outstanding shares of that class of securities. This restriction is in place to prevent a franchisee from gaining significant influence or control over a competing business, which could potentially harm the interests of 360 Painting.
This policy balances the franchisee's right to invest and diversify their assets with 360 Painting's need to protect its competitive position and confidential information. It is a fairly standard clause in franchise agreements to prevent conflicts of interest while still allowing franchisees some investment flexibility.