Is a Bang Cookies franchisee allowed to divert customers from the franchisor or other franchisees?
Bang_Cookies Franchise · 2024 FDDAnswer 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's 2024 Franchise Disclosure Document, franchisees are explicitly prohibited from diverting or attempting to divert business or customers from the franchisor, its affiliates, or other franchisees. This restriction is in place during the term of the Franchise Agreement. The FDD states that engaging in such activities would be considered unfair competition and would cause harm to Bang Cookies, the System, and other Bang Cookies Shop franchisees. This obligation extends not only to the franchisee but also to their Owners and Spouses, who are required to sign a Franchise Owner and Spouse Agreement and Guaranty.
This restriction is part of a broader set of restrictive covenants outlined in the Franchise Agreement, which aims to protect the Bang Cookies brand and the interests of all franchisees within the system. These covenants also prevent franchisees from engaging in competitive businesses or inducing customers to patronize businesses other than Bang Cookies Shops. The franchisor also reserves the right to control marketing efforts. Franchisees must target their marketing within their designated territory and cannot intentionally solicit customers from outside that territory.
For a prospective Bang Cookies franchisee, this means that they must focus their business efforts on growing their customer base within their designated territory and are not allowed to actively take customers away from other parts of the Bang Cookies system. Violating these restrictions could lead to legal repercussions and damage the relationship with the franchisor and other franchisees. It is important to understand the full scope of these restrictive covenants before entering into a franchise agreement with Bang Cookies.