What is the 360 Painting franchisee's obligation regarding misuse of confidential information?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
** shall be tolled during any default under this Section 18.1, and that the restriction shall be applicable for the greater of two years from termination or two years from a court issuing an order restraining the Bound Party from violating this Section 18.1.
- 18.2 Non-Solicitation. Franchisee and the Bound Parties agree that while this Agreement is in effect and for two (2) years after expiration or termination of this Agreement for any reason, or following the date of a Transfer by Franchisee, they will not directly solicit or otherwise materially interfere with or disrupt the customer or vendor relationship between Franchisor and any of their respective customers and vendors or between any other 360 Painting franchisee and its customers and vendors.
18.3 Trade Secrets and Confidential Information.
Franchisee acknowledges and agrees that in connection with the operation of 360 Painting Businesses and the System, Franchisor has developed competitively sensitive proprietary and confidential information
which are not commonly known by or available to the public. This proprietary and confidential information does not include any information that (a) is commonly known by or available to the public; (b) has been voluntarily disclosed to the public by Franchisor; (c) been independently developed or lawfully obtained by Franchisee; or (d) has otherwise entered the public domain through lawful means. All information which comprises the System including the information and data in the Brand Standards Manual will be presumed to be confidential information of Franchisor, along with the identity and contact information of any customers of the Business.
Franchisee and each Bound Party agree that while this Agreement remains in effect such party will not, directly or indirectly, disclose or publish to any party, or copy or use for such party's own benefit, or for the benefit of any other party, any of Franchisor's proprietary or confidential information, except as required to carry out Franchisee's obligations under this Agreement or as Franchisor has otherwise expressly approved in writing. All proprietary and confidential information of Franchisor is the sole and exclusive property of Franchisor. Franchisee and each Bound Party agree that the restriction contained in the preceding sentence will remain in effect with respect to the confidential information for five years following termination or expiration of this Agreement for any reason; provided, however, if the confidential information rises to the level of a trade secret, then such restriction shall remain in effect until such time as the information does not constitute a trade secret. Franchisee also agrees that it and all of its employees and agents will take appropriate steps to protect Franchisor's confidential information from any unauthorized disclosure, copying or use. At any time upon Franchisor's request, and in any event upon termination or expiration of this Agreement, Franchisee will immediately return any copies of documents where there are materials containing confidential information and will take appropriate steps to permanently delete and render unusable any confidential information stored electronically.
- 18.4 Personal Covenants of Certain Bound Parties. As a condition to the effectiveness of this Agreement, and at the time Franchisee delivers this signed Agreement to Franchisor, each Bound Party of Franchisee must sign and deliver to Franchisor the Personal Covenants attached hereto as Exhibit C-2 (the "Personal Covenants"), agreeing to be bound personally by all the provisions of Sections 18.1, 18.2 and 18.3 hereof.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to the 2025 FDD, 360 Painting franchisees acknowledge that the franchisor has developed proprietary and confidential information vital to the System and 360 Painting Businesses. This information isn't publicly known or available, nor is it information voluntarily disclosed by 360 Painting, independently developed/lawfully obtained by the franchisee, or in the public domain through lawful means. All System information, including data in the Brand Standards Manual and customer contact information, is presumed confidential.
Franchisees and related parties must not disclose, publish, copy, or use 360 Painting's confidential information for their own or another party's benefit, unless required to fulfill the Franchise Agreement or expressly approved in writing by 360 Painting. All confidential information remains 360 Painting's exclusive property. This restriction extends for five years post-termination/expiration, but if the information qualifies as a trade secret, the restriction lasts as long as it remains a trade secret. Franchisees must also take steps to protect this information from unauthorized access.
Upon request or termination/expiration of the agreement, franchisees must return all documents containing confidential information and permanently delete any electronically stored confidential data. Franchisees must also refrain from using confidential information, the Brand Standards Manual, or other information received from 360 Painting, including customer data, in violation of Section 18.3 of the agreement. The franchisee acknowledges that it would be difficult to ascertain monetary damages and that irreparable harm would result from breach of these covenants, and agrees that, in the event of the actual or threatened breach of this Section 18 by Franchisee, 360 Painting shall be entitled to an injunction, without bond, restraining such person from any such actual or threatened breach, in addition to any other relief to which Franchisor may be entitled in law or equity.
These obligations are typical in franchising, as franchisors need to protect their intellectual property and business methods. Prospective 360 Painting franchisees should carefully review Section 18.3 of the Franchise Agreement to fully understand the scope of confidential information and the restrictions on its use, both during and after the franchise term. They should also be aware of the potential legal consequences, including injunctions, for any breach of these confidentiality obligations.