What sections of the 360 Painting Franchise Agreement should the franchisee read and understand?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
1. GRANT OF FRANCHISE
During the term of this Agreement, Franchisor hereby grants to Franchisee the non-exclusive right and license, and Franchisee undertakes the obligation, to develop and operate a 360 Painting Business and to use solely in connection therewith, the Marks and the System in accordance with the terms and conditions of this Agreement only within the Protected Territory (as defined below). Franchisee agrees to use the Marks and System, as they are changed, improved and further developed by Franchisor from time to time. Unless otherwise agreed to in writing by Franchisor, Franchisee has three months from the Effective Date to complete the initial training as required by Section 13.1 and to commence operation of the Business. If Franchisee fails to complete initial training and commence operation of the Business within this time period, Franchisor may terminate this Agreement, as provided in Sections 19.2(i) and 19.2(ii), below. Franchisee must obtain Franchisor's written approval prior to commencing operation of the Business.
2. TERRITORY
- 2.1 Protected Territory.
Franchisee shall only have the right to use the Marks and the System in the residential geographic area described by ZIP Codes on Exhibit C-1 attached hereto (the "Protected Territory").
The Protected Territory shall include between fifty thousand (50,000) to eighty thousand (80,000) single family dwellings as of the date of this Agreement.
If the United States Postal Service modifies any of the ZIP Codes encompassed by the Protected Territory or which represent the area included the Protected Territory, Franchisor may modify the Protected Territory to account for such ZIP Code modification(s).
The modified Protected Territory may result in fewer people being included in or a smaller geographic area being represented by the Protected Territory.
- (ii) Post-Term Non-Competition.
In addition to and not in limitation of any other restrictions on Franchisee contained herein, Franchisee and the Bound Parties agree that they will not, for two (2) years following the effective date of termination or expiration 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).
Franchisee further understands and acknowledges the difficulty of ascertaining monetary damages and the irreparable harm that 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 or any of its partners or shareholders or any member of the immediate family of Franchisee or any of its partners or shareholders, Franchisor 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.
3. TERM AND RENEWAL
3.1 Initial Term. Unless terminated earlier in accordance with the terms and conditions set forth herein, this Agreement and the franchise granted hereunder shall have an initial term of ten (10) years commencing on the Effective Date (the "Initial Term").
3.2 Renewal. Upon the expiration of the Initial Term, Franchisee shall have the right to renew the franchise granted hereunder for up to two (2) successive ten (10) - year periods, provided that all of the following conditions are met:
(iii) Franchisee shall execute, at Franchisor's option, Franchisor's then-current form of Franchise Agreement, which Franchise Agreement shall supersede in all respects and may contain terms and conditions substantially different from those set forth herein, including, without limitation: (a) additional fees and/or an increase in any or all Continuing Fees (as such term is hereinafter defined), (b) a change in the size or composition of the Protected Territory, (c) the renewal Franchise Agreement shall only provide for the number of additional renewal terms called for by this Agreement, and (d) mandatory minimum periodic royalty requirements that, in Franchisor's determination, take into account the thencurrent market, the maturity of the Business and its record of Gross Sales during the term;
(iv) Franchisee shall pay a renewal fee equal to twenty-five percent (25%) of the thencurrent Fra
9.14 Full-Time & Best Efforts. Ensure that an individual who has completed the initial training program described in Section 13.1 below (the "Manager") devotes his or her best and devoted efforts to the management of the day-to-day operation of the Business.
9.15 Participation in Loyalty Programs and Promotions. If Franchisor institutes a customer loyalty program, participate in such customer loyalty program and pay all participation fees due to Franchisor or any third-party vendor, and also participate in all national, regional or local advertising and promotional activities Franchisor requires.
Franchisee understands that Franchisor implements promotions such as discount coupons and other activities intended to enhance customer awareness for 360 Painting Businesses on a national, regional or local level.
Franchisee understands that its participation in these programs is essential to its success and that its participation may entail some cost to Franchisee.
Franchisee agrees that Franchisor has no obligation to reimburse Franchisee for any costs it incurs due to its mandatory participation in these special promotional programs.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to the 2025 360 Painting Franchise Disclosure Document, several sections of the Franchise Agreement are particularly important for franchisees to understand. Section 1 outlines the grant of the franchise, detailing the non-exclusive right and obligation to operate a 360 Painting business using the Marks and System within the Protected Territory. It specifies the timeframe for completing initial training (Section 13.1) and commencing business operations, with potential termination consequences (Sections 19.2(i) and 19.2(ii)) for non-compliance. Franchisees must also secure written approval before starting their business. Section 2 defines the Protected Territory, which includes between 50,000 to 80,000 single-family dwellings, and notes that this territory can be modified by 360 Painting due to changes in ZIP Codes.
Section 18 covers non-competition and non-solicitation agreements. It states that for two years after the agreement's termination, franchisees cannot engage in a Competitive Business within the Protected Territory or within 20 miles of any other 360 Painting Business. A Competitive Business is defined as one offering painting, decorating, or wall finishing services. Franchisees are also prohibited from soliciting or disrupting relationships between 360 Painting and its customers or vendors for two years post-termination. This section also addresses trade secrets and confidential information, emphasizing the irreparable harm that could result from breaches of these covenants, entitling 360 Painting to injunctive relief.
Section 3 details the initial term and renewal conditions of the franchise agreement. The initial term is ten years, with the option to renew for two additional ten-year periods if the franchisee meets specific conditions, including providing timely written notice, remaining in good standing, and executing 360 Painting's then-current form of Franchise Agreement. The renewal agreement may contain substantially different terms, such as changes to fees, the Protected Territory, and mandatory minimum royalty requirements. Additionally, a renewal fee equal to 25% of the then-current franchise fee is required. Section 9 outlines the franchisee's obligations, including promoting the business, using vehicles appropriately, offering only approved products and services, ensuring full-time management, and participating in loyalty programs and promotions. Franchisees are responsible for costs associated with mandatory participation in promotional programs, without any obligation for reimbursement from 360 Painting.