factual

What is the definition of 'Prohibited Activities' in the Bang Cookies franchise agreement?

Bang_Cookies Franchise · 2024 FDD

Answer from 2024 FDD Document

Franchisee agrees that during the Term of this Agreement, Franchisee shall not engage in the following activities (the "Prohibited Activities"): (a) owning and/or having any legal or equitable interest whether, as an individual proprietor, owner, partner, member or shareholder of a Corporate Entity, or, in any similar capacity, in a Competitive Business other than, owning an interest of 3% or less in a publicly traded company that is a Competitive Business; (b) operating, managing, funding and/or performing services whether, as an employee, officer, director, manager, consultant, representative, agent, and/or creditor or, in any similar capacity, for or benefitting a Competitive Business; (c) diverting or attempting to divert any business or customers from Franchisor or, one of Franchisor's affiliates or franchisees; (d) inducing any customer or client of Franchisor, Franchisor's affiliates, franchisees of the System, or, of Franchisee, to any other person or business that is not a Bang Cookies Shop; and/or (e) engaging in any actions, inactions, and/or activities in violation of Articles 6.B. and/or 6.C. of this Agreement (all, individually and, collectively, referred to as the "Prohibited Activities"). Franchisee agrees that if Franchisee were to engage in the Prohibited Activities that such actions would be unfair, would constitute unfair competition and would cause harm to Franchisor, the System and other Bang Cookies Shop franchisees. Franchisee agrees that the foregoing covenants and obligations shall also apply to Franchisee's Owners and Spouses and that Franchisee's Owners and Spouses shall each execute and deliver to Franchisor the Franchise Owner and Spouse Agreement and Guaranty in the form attached to this Agreement as Exhibit 1.

Source: Item 23 — RECEIPTS (FDD pages 56–245)

What This Means (2024 FDD)

According to Bang Cookies' 2024 Franchise Disclosure Document, 'Prohibited Activities' are defined within the context of restrictive covenants related to unfair competition and non-competition obligations during the term of the franchise agreement.

Specifically, during the term of the agreement, a Bang Cookies franchisee is prohibited from: (a) owning or having any legal or equitable interest in a Competitive Business (with an exception for owning 3% or less of a publicly traded company that is a Competitive Business); (b) operating, managing, funding, or performing services for a Competitive Business; (c) diverting or attempting to divert any business or customers from Bang Cookies or its affiliates or franchisees; (d) inducing any customer or client of Bang Cookies, its affiliates, or franchisees to any other person or business that is not a Bang Cookies Shop; and/or (e) engaging in any actions, inactions, and/or activities in violation of Articles 6.B. and/or 6.C. of the agreement.

Bang Cookies emphasizes that engaging in these Prohibited Activities would be considered unfair competition and would cause harm to the franchisor, the system, and other Bang Cookies Shop franchisees. The agreement also extends these restrictions to the franchisee's Owners and Spouses, requiring them to execute a Franchise Owner and Spouse Agreement and Guaranty.

These types of non-compete clauses are common in franchising to protect the brand and the franchise system. Prospective Bang Cookies franchisees should carefully review these restrictions to understand the limitations on their business activities during the term of the franchise agreement and ensure they do not violate these terms.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.