Is purchasing stock in a publicly traded company that competes with Basecamp Fitness considered a violation of the non-compete agreement?
Basecamp_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
- D.
Exception.
The purchase of a publicly traded security of a corporation engaged in a competitive business or service will not in itself be deemed violative of this Section 17 so long as you do not own, directly or indirectly, more than five percent (5%) of the securities of such corporation.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Basecamp Fitness's 2025 Franchise Disclosure Document, purchasing stock in a publicly traded company that competes with Basecamp Fitness will not violate the non-compete agreement if certain conditions are met. Specifically, this exception applies as long as the franchisee does not own, either directly or indirectly, more than five percent of the securities of the competing corporation. This provision is designed to prevent franchisees from exerting significant influence or control over a competing business while still allowing for minor investment opportunities.
This exception to the non-compete agreement provides a limited opportunity for franchisees to invest in publicly traded competitors without breaching their contractual obligations to Basecamp Fitness. However, it's crucial for franchisees to monitor their ownership stake to ensure it remains below the 5% threshold. Exceeding this limit could be construed as a violation of the non-compete agreement, potentially leading to legal repercussions.
It is important for prospective franchisees to fully understand the implications of this clause. While a small investment is permitted, any attempt to exert control or influence over a competing business, even with a stake below 5%, could still be problematic. Franchisees should seek legal counsel to ensure their investment activities do not conflict with their obligations under the franchise agreement.