Does the term 'you' in the Beauty Bungalows non-compete covenants extend to those holding any interest in the franchisee entity?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
| 7. Do you understand that you are bound by the non-compete covenants (both in-term and post-term) listed in your Franchise Agreement and that an injunction is an appropriate remedy to protect the interests of the Beauty Bungalows system if you violate the covenant(s)? Further, do you understand that the term "you" for purposes of the non-compete covenants is defined broadly, such that any actions in violation of the covenants by those holding any interest in the franchisee entity may result in an injunction, default and termination of the Franchise Agreement? |
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| Check one: □ Yes. □ No. |
15.01 Covenants Not to Compete. During the term of this Agreement and for two (2) years after expiration, earlier termination, or approved Transfer of this Agreement for any reason (and during the term of this Agreement and for two (2) years from the date a person ceases to be an owner, shareholder, member, officer, or director of Franchisee), neither Franchisee nor any of Franchisee's owners, shareholders, members, partners, officers, or directors may participate directly or indirectly or serve in any capacity in any Competitive Business. This covenant not to compete applies: (i) during the term of the Agreement, within any state in which Franchisor or franchisees do business; and after termination of the Agreement within a twenty (20) mile radius from the boundary of Franchisee's Protected Territory, and within a twenty (20) mile radius from any franchised, Franchisor-owned, or affiliated company-owned Beauty Bungalows Studio; (ii) on the Internet; and (iii) on any other Multi-Area Marketing channels used by Franchisor.
Source: Item 22 — CONTRACTS (FDD pages 47–48)
What This Means (2025 FDD)
According to Beauty Bungalows' 2025 Franchise Disclosure Document, the term 'you' in the non-compete covenants is broadly defined. This definition extends the non-compete obligations to individuals holding any interest in the franchisee entity. This means that not only the franchisee themselves, but also owners, shareholders, members, partners, officers, or directors are subject to the restrictions outlined in the non-compete agreements.
This broad definition has significant implications for prospective Beauty Bungalows franchisees. It means that anyone with a financial or managerial stake in the franchise must also abide by the non-compete terms, both during the franchise term and for a specified period afterward. If any of these individuals violate the non-compete covenants, it could result in an injunction, default, and termination of the Franchise Agreement.
Beauty Bungalows' non-compete agreement lasts during the term of the Agreement and for two years after expiration, earlier termination, or approved Transfer of the Agreement. During this time, the franchisee and related parties cannot participate in any Competitive Business. This restriction applies within any state where Beauty Bungalows or its franchisees operate, within a 20-mile radius of the franchisee's Protected Territory, and within a 20-mile radius of any franchised, franchisor-owned, or affiliated company-owned Beauty Bungalows Studio. The non-compete also extends to the Internet and any other Multi-Area Marketing channels used by the franchisor.
It is important for potential franchisees to carefully consider these non-compete obligations and ensure that all individuals involved in the franchise understand and are willing to comply with these restrictions. This is especially crucial if any owners or investors are currently involved in similar or competitive businesses, as their involvement could trigger a violation of the non-compete agreement and put the franchise at risk.