What is the geographic scope of the post-term non-competition agreement for a 360 Painting franchise, specifically regarding other 360 Painting businesses?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
xpiration of this Agreement for any reason, or following the date of a Transfer by Franchisee, directly or indirectly, for and on behalf of itself, himself, herself or any other person or entity, (a) have any direct or indirect interest as a disclosed or beneficial owner in a Competitive Business or (b) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for a Competitive Business which is (i) located or operating within the Protected Territory; or (ii) within a radius of twenty (20) miles as the crow flies of the Protected Territory or (iii) located in or operating within twenty (20) miles of the primary office of any other existing 360 Painting Business or 360 Painting Business in development that has been assigned a protected territory.
- (iii) Competitive Business. For purposes of this Agreement, the term "Competitive Business" means any business operating, or granting franchises or licenses to others to operate, in any business which offers or sells painting, decorating and wall finishing services (other than another 360 Painting Business operated by Franchisee under license from Franchisor). 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.
- (iv) General. The parties acknowledge that the covenants contained in this Section 18 are based on the reason and understanding that Franchisee and the Bound Parties will possess knowledge of Franchisor's business and operating methods and confidential information, disclosure and use of which would prejudice the interest of Franchisor and its franchisees.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to the 2025 360 Painting Franchise Disclosure Document, the post-term non-competition agreement restricts a franchisee from engaging in a Competitive Business. A Competitive Business is defined as any business offering painting, decorating, and wall finishing services, excluding another 360 Painting Business operated under a franchise agreement. This restriction applies for two years following the termination or expiration of the franchise agreement, or after a transfer by the franchisee.
The geographic scope of this restriction includes not having a direct or indirect interest in a Competitive Business or performing services for one. This applies if the Competitive Business is located within the franchisee's Protected Territory, within a 20-mile radius of the Protected Territory, or within 20 miles of the primary office of any other existing 360 Painting Business or a 360 Painting Business in development that has been assigned a protected territory.
In practical terms, this means that for two years after leaving the 360 Painting system, a former franchisee cannot operate or be involved with a competing painting business within their original territory or near any other 360 Painting franchise. This is designed to protect 360 Painting's market share and prevent former franchisees from using the knowledge and experience gained during their franchise term to unfairly compete with existing franchisees. The franchisee is permitted to own less than 3% of a Competitive Business if the securities are listed on a stock exchange or traded on the over-the-counter market.