If a Bang Cookies franchisee's immediate family member engages in Prohibited Activities, what is the presumption regarding the franchisee's violation of the agreement?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee agrees that should Franchisee circumvent the restrictive covenants and obligations of this Article 6 by disclosing Confidential Information or Know-How to an Immediate Family Member, that Franchisor and the System, will be irreparably harmed. Franchisee agrees that if Franchisee or, one of Franchisee's Owners, discloses Confidential Information or Know-How to an immediate family member and, the immediate family member of Franchisee or an Owner, uses the Confidential Information or Know-How to engage in activities that, for Franchisee, qualify as Prohibited Activities, that Franchisor and the System will be irreparably harmed. Franchisee agrees that as between Franchisee and Franchisor, that Franchisee and Franchisee's Owners are in a better position to know if Franchisee permitted and/or provided an immediate family member with access to the Confidential Information or Know-How and that, therefore, Franchisee agrees that Franchisee will be presumed to have violated the terms of this Agreement and, in particular, the restrictive covenants and obligations set forth in this Article 6 if any member of Franchisee's immediate family or the immediate family of an Owner: (a) engages in any Prohibited Activities during any period of time during which Franchisee is prohibited from engaging in the Prohibited Activities; and/or (b) uses or discloses the Confidential Information and/or Know-How. Franchisee may rebut the foregoing presumption by providing evidence conclusively demonstrating that neither Franchisee nor Franchisee's Owners disclosed the Confidential Information and did not permit disclosure of the Confidential Information to the family member of Franchisee or Franchisee's Owner. Franchisee agrees that the foregoing covenants, obligations, representations, and burden of proof 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, if a franchisee or one of their owners discloses confidential information or know-how to an immediate family member, and that family member uses this information to engage in activities that would be considered prohibited activities for the franchisee, Bang Cookies will presume that the franchisee has violated the terms of the agreement. This presumption specifically applies to violations of the restrictive covenants and obligations outlined in Article 6 of the agreement.
An immediate family member is defined as the spouse and any other member of the household, including children and grandchildren, of the franchisee or the franchisee's owners. Prohibited Activities include owning or having a legal or equitable interest in a competitive business (with a minor exception for owning 3% or less of a publicly traded company), operating or managing a competitive business, diverting customers from Bang Cookies, or inducing Bang Cookies' customers to another business that is not a Bang Cookies Shop.
However, the Bang Cookies franchisee has the opportunity to challenge this presumption. To do so, the franchisee must provide conclusive evidence demonstrating that neither they nor their owners disclosed the confidential information or permitted its disclosure to the family member. This burden of proof rests on the franchisee to demonstrate their lack of involvement in the family member's actions. This obligation also extends to the franchisee's owners and spouses, who must also agree to the terms outlined in the Franchise Owner and Spouse Agreement and Guaranty.