Can a Bang Cookies franchisee operate a Competitive Business during the term of the agreement?
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 restricted from engaging in unfair competition during the term of the franchise agreement. Specifically, a franchisee cannot own or have any legal or equitable interest in a Competitive Business, with a limited exception of owning 3% or less in a publicly traded company that is a Competitive Business.
This restriction extends to operating, managing, funding, or performing services for a Competitive Business, whether as an employee, officer, director, manager, consultant, or in any similar capacity. Franchisees are also prohibited from diverting or attempting to divert business or customers from Bang Cookies or its affiliates and franchisees. Inducing customers to other businesses that are not Bang Cookies Shops is also forbidden.
These covenants also apply to the franchisee's owners and spouses, who are required to sign a Franchise Owner and Spouse Agreement and Guaranty. Bang Cookies emphasizes that engaging in these prohibited activities would be considered unfair competition and would cause harm to the franchisor, the Bang Cookies system, and other franchisees. This is a fairly standard restriction in franchising, intended to protect the brand and prevent franchisees from directly competing with the system while still under the franchise agreement.
In summary, a Bang Cookies franchisee is significantly restricted from operating or being involved with any competitive business during the term of their agreement, with a minor exception for owning a small stake in a publicly traded competitor. This is designed to protect Bang Cookies's market position and prevent conflicts of interest.