Do the non-competition covenants in the Beauty Bungalows Franchise Agreement apply to the Development Agreement during the term of the franchise, as stated in Section 8?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Agreement | Summary | |
|---|---|---|---|
| law). Any promises outside the Development Agreement, the Franchise Agreements, and this FDD may not be enforceable. However, nothing in the Franchise Agreement will have the effect of disclaiming any of the representations made in this FDD. | |||
| U | Dispute resolution by arbitration or mediation | Section 8 | The dispute resolution provisions of the Franchise Agreement apply to any disputes under the Development Agreement (subject to applicable state law) |
| V | Choice of forum | Section 8 | The choice of forum provisions of the Franchise Agreement apply to the Development Agreement (subject to applicable state law) |
| W | Choice of law | Section 8 | The choice of law provisions of the Franchise Agreement apply to the Development Agreement (subject to state law) |
| Provision | Section in ADA Agreement | Summary | |
| G | "Cause" defined - curable defaults | Not Applicable | Not Applicable |
| H | "Cause" defined - non-curable defaults | Section 6.1 | You fail to have open and operating the minimum number of Franchised Businesses specified in the Development Schedule by any Opening Deadline specified in the Development Schedule; any Franchise Agreement is terminated a result of default; or you breach or otherwise fail to comply fully with any other provision of the Development Agreement. |
| I | Franchisee's obligations on termination/nonrenewal | Section 6.2 | You will lose the right to continue to develop Franchised Businesses in your Development Area. |
| J | Assignment of contract by franchisor | Section 7 | Fully assignable and transferrable by us. |
| K | "Transfer" by franchisee - defined | Section 7 | Includes transfer of the Development Agreement, any interest in the Development Agreement, or, if you are a business entity, any interest in the entity. |
| L | Franchisor approval of transfer by franchisee | Section 7 | We have the right to approve or not approve all transfers in our sole discretion. |
| M | Conditions for franchisor approval of transfer | Section 7 | We have sole discretion in setting conditions for our approval of a transfer. |
| N | Franchisor's right of first refusal to acquire franchisee's Business. | Section 7 | We have the first right of refusal on all transfer, exercisable withing 30 days of receiving an executed copy of the contract of transfer. |
| O | Franchisor's option to purchase franchisee's Business | Not Applicable | Not applicable |
| P | Death or disability of franchisee | Not Applicable | We have the right approve or disapprove any transfer in our sole discretion. |
| Q | Non-competition covenants during the term of franchise | Section 8 | The non-competition covenants in your Franchise Agreement shall apply to your Development Agreement |
| R | Non-competition covenants after the franchise is terminated or expires | Section 8 | The non-competition covenants in your Franchise Agreement shall apply to your Development Agreement. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 36–40)
What This Means (2025 FDD)
According to Beauty Bungalows' 2025 Franchise Disclosure Document, the non-competition covenants within the Franchise Agreement do indeed apply to the Development Agreement during the term of the franchise. Specifically, Section 8 of the Development Agreement incorporates these non-compete obligations. This means that as a multi-unit developer, you are bound by the same restrictions on competitive activities as a single-unit franchisee during the period you are developing your Beauty Bungalows locations.
This is a significant consideration for prospective developers. It restricts your ability to engage in any competing business ventures while you are still under the Development Agreement. The restrictions likely extend to the territory covered by the development agreement. It is important to carefully review the specific terms of the non-competition covenants in the Franchise Agreement, as these will directly impact your business activities during the development phase.
Furthermore, the FDD also states that the non-competition covenants in the Franchise Agreement apply to the Development Agreement even after the franchise is terminated or expires. This extended restriction could further limit your business options post-termination. As with any legal agreement, it is advisable to seek legal counsel to fully understand the implications of these non-competition clauses and how they might affect your specific circumstances and business plans.
It is also important to note that the dispute resolution, choice of forum, and choice of law provisions of the Franchise Agreement also apply to the Development Agreement, as stated in Section 8. This means that any legal disputes arising from the Development Agreement will be subject to the same arbitration or mediation processes, forum, and governing law as those in the Franchise Agreement. This ensures consistency in how disputes are handled across both agreements.