Under what conditions is a Bang Cookies franchisee presumed to have violated the agreement regarding know-how disclosure to family members?
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' 2024 Franchise Disclosure Document, a franchisee is presumed to have violated the terms of the agreement, specifically regarding restrictive covenants and obligations, if a member of the franchisee's immediate family or the immediate family of an owner engages in prohibited activities during a period when the franchisee is prohibited from doing so. This presumption also applies if a family member uses or discloses confidential information or know-how related to the Bang Cookies business.
This presumption places a significant burden on the franchisee. The franchisee must demonstrate that neither they nor their owners disclosed confidential information or permitted its disclosure to the family member. This means Bang Cookies holds franchisees accountable for the actions of their immediate family members regarding confidential information and know-how.
This clause is designed to protect Bang Cookies' trade secrets and operational methods by preventing them from being used by unauthorized parties, even indirectly through family members. The definition of "Immediate Family Member" includes the spouse of a person and any other member of the household of such person, including, without limitation, children, and grandchildren of such person. This broad definition means franchisees need to be especially vigilant about who has access to sensitive business information.
It is important to note that the franchisee can rebut this presumption by providing conclusive evidence that they did not disclose the information or permit its disclosure. However, the burden of proof lies with the franchisee, which could be challenging depending on the circumstances. This highlights the importance of maintaining strict confidentiality and controlling access to sensitive information within the franchisee's household.