Does Alloy require or encourage franchisees to have hourly employees sign covenants not to compete?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
D. Noncompete Covenants. You agree that you will receive valuable training, Confidential Information and goodwill that you otherwise would not receive or have access to but for the rights licensed to you under this Agreement. You therefore agree to the following noncompetition covenants:
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- Unless otherwise specified, the term "you" as used in this subparagraph 10.D includes, collectively and individually, all Owners, guarantors, officers, directors, members, managers, partners, as the case may be, and holders of any ownership interest in you and any immediate family members of same including spouses and children. We may require you to obtain from your manager and other individuals identified in the preceding sentence a signed non-compete agreement in a form satisfactory to us that contains the noncompete provisions of this subparagraph 10.D.
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- You covenant that during the term of this Agreement or during any Interim Period you will not, either directly or indirectly, for yourself, or through, on behalf of, or in conjunction with any person or entity, own, manage, operate, maintain, engage in, consult with or have any interest in any Competitive Business.
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- You covenant that you will not, for a period of two years after the expiration or termination of this Agreement, or after the expiration of any Interim Period, regardless of the cause of termination, or within two years of the sale of the Facility or any interest in you, either directly or indirectly, for yourself, or through, on behalf of, or in conjunction with any person or entity, own, manage, operate, maintain, engage in, consult with or have any interest in a Competing Business:
- a. At the premises of the former Facility;
- b. Within 15 miles of the Facility; or
- c. Within 15 miles of any other business or facility using the ALLOY System, whether franchised or owned by us or our affiliates.
For purposes of this Section 10.D, a Competing Business includes any facility or business which includes offering personal training services in a one-on-one or group setting.
- You agree that the length of time in subpart (3) will be tolled for any period during which you are in breach of the covenants or any other period during which we seek to enforce this Agreement. The parties agree that each of the foregoing covenants will be construed as independent of any other covenant or provision of this Agreement.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Alloy FDD, Alloy may require franchisees to obtain non-compete agreements from their managers and other individuals. The FDD specifies that "you" includes owners, guarantors, officers, directors, members, managers, partners, and holders of any ownership interest, as well as their immediate family members. Alloy may require franchisees to obtain a signed non-compete agreement from their manager and other individuals identified. The agreement must be in a form satisfactory to Alloy and contain the non-compete provisions outlined in the franchise agreement.
The non-compete agreement restricts these individuals from engaging in any Competitive Business during the term of the Franchise Agreement or any Interim Period. It also extends for two years after the expiration or termination of the agreement, regardless of the cause of termination, or within two years of the sale of the Facility or any interest in the franchisee. The restriction applies to owning, managing, operating, maintaining, engaging in, consulting with, or having any interest in a Competing Business within specific locations.
A Competing Business is defined as any facility or business that offers personal training services in a one-on-one or group setting. The restricted locations include the premises of the former Facility, within 15 miles of the Facility, or within 15 miles of any other business or facility using the Alloy System, whether franchised or owned by Alloy or its affiliates. The length of the non-compete period may be extended if the individual breaches the covenants or if Alloy seeks to enforce the agreement.
For prospective Alloy franchisees, this means that key personnel such as managers may be required to sign non-compete agreements. These agreements could significantly limit their future employment options within the fitness industry, both during the franchise term and for a period after its termination. Franchisees should carefully review the terms of the non-compete agreement and understand its implications for themselves and their key employees. Franchisees should also be aware that the enforceability of non-compete agreements can vary by state, and they may want to seek legal advice to understand the specific regulations in their jurisdiction.