Does the Annex Brands franchise agreement prohibit a franchisee from diverting business from their Annex Brands Center to a competitive business?
Annex_Brands Franchise · 2025 FDDAnswer from 2025 FDD Document
OR DIVERT. During the term of the Franchise and for a continuous 2-year period after any transfer, or after the expiration, termination or non-renewal of the Franchise, either directly or indirectly, or through an Immediate Family Member, as an employee, manager, consultant, operator, lender, investor, financier, representative, disclosed or beneficial owner, part owner, proprietor, partner, principal, officer, director, co-venturer, stockholder (except as the owner of securities listed on a stock exchange or
traded on the over-the-counter market that represent 5% or less of that class of securities), member, agent, participant or in any other capacity, Franchisee agrees to not:
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- have any interest in a business that offers business support, mailbox rental (physical and virtual), package receiving, postal, printing and copying (including digital printing and copying), digital transfer, offset printing, large-format printing, binding, finishing, personalized mailing, direct mail, packaging, crating, pick-up and delivery, palletizing, freight, shipping, office supply, boxes and packaging materials, notary or fingerprinting products or services, or related products or services ("competitive business"), and that is located within a radius of 5 miles of: a) the Center or b) any Center or Commercial Logistics Center in operation or under construction on the effective date of any transfer, or the expiration, termination or non-renewal of the Franchise; or
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- divert or attempt to divert any business or customer of the Center to a competitive business.
If Franchisee violates any covenant in this Subsection 16.D during the 2-year period immediately after the effective date of any transfer, or the expiration, termination or non-renewal of the Franchise, Franchisee agrees to comply with such covenant during a subsequent 2-year period, and Franchisee further agrees that an arbitrator or judge may order compliance with such covenant during any subsequent 2-year period.
Source: Item 22 — Contracts (FDD pages 109–110)
What This Means (2025 FDD)
According to the 2025 Annex Brands Franchise Disclosure Document, the franchise agreement does address the diversion of business. During the term of the franchise and for two years after any transfer, expiration, termination, or non-renewal of the franchise, franchisees are prohibited from diverting or attempting to divert any business or customer of the Center to a competitive business. This restriction applies to the franchisee directly or indirectly through family members or other business relationships.
This means that an Annex Brands franchisee is contractually obligated to not take customers or business opportunities away from their franchised center and direct them to a competing business. This obligation extends not only during the term of the agreement but also for a period of two years after the franchise relationship ends. The restriction aims to protect the Annex Brands system and other franchisees from unfair competition by a former franchisee who might try to leverage their knowledge and relationships gained during their time as a franchisee.
The agreement specifies that a 'competitive business' includes those offering business support, mailbox rental, package receiving, postal services, printing and copying, and other related services. This definition is important because it clarifies the scope of activities that the franchisee is restricted from engaging in, ensuring that they cannot operate or be involved with a similar business that could draw customers away from the Annex Brands center. This covenant helps maintain the integrity of the Annex Brands network and protects the investment of other franchisees within the system.
This restriction is typical in franchising to protect the brand and other franchisees in the system. Prospective franchisees should carefully consider the implications of this non-compete and non-diversion clause, particularly if they have existing business interests or plans that might conflict with these restrictions. Understanding the scope and duration of these covenants is crucial for making an informed decision about investing in an Annex Brands franchise.