Under what condition is 360 Painting entitled to lost profits from the franchisee?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
If any part of this restriction is found to be unreasonable in time or distance, such time or distance may be reduced by appropriate order of the court to that deemed reasonable.
Franchisee further acknowledges and agrees that the provisions of this Section 18.1 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
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, 360 Painting is entitled to injunctive relief, potentially including lost profits, if a franchisee breaches Section 18 of the agreement. Section 18 includes subsections covering non-solicitation and trade secrets/confidential information. This applies not only to the franchisee but also to their partners, shareholders, and immediate family members.
The agreement emphasizes the difficulty of calculating monetary damages resulting from a breach of these covenants and acknowledges the irreparable harm that could occur. Therefore, 360 Painting can seek a court order (injunction) to prevent the franchisee or related parties from violating these specific sections of the agreement. This legal remedy is in addition to any other legal or equitable relief 360 Painting might pursue.
The non-solicitation clause (Section 18.2) prevents franchisees from soliciting or disrupting relationships with 360 Painting's customers or vendors, as well as those of other franchisees, both during the agreement term and for two years after termination or transfer. The franchisee also acknowledges that 360 Painting has developed competitively sensitive and confidential information related to the operation of 360 Painting businesses and the System.
It's important to note that if any part of the restriction is deemed unreasonable in terms of time or distance, a court may reduce it to a reasonable level. Additionally, the restriction period in Section 18.1 is extended during any period of default, lasting for the greater of two years from termination or two years from a court order restraining the violation.