After the Belocal agreement terminates, for how long is the franchisee restricted from soliciting business advertisers of the Franchisor?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
For a period of two years after the termination, expiration, or transfer of this Agreement, regardless of the reason for such termination, expiration, or transfer, Franchisee and its Principal(s) shall not, solicit or attempt to solicit, using any form of oral, written, or electronic communications, any current or prospective business advertiser of Franchisor (or any of its affiliates) with whom Franchisee or any Principal interacted during the twelve-month period prior to the termination, expiration, or transfer of this Agreement, for the purpose of soliciting, offering, or accepting goods or services that are competitive with those offered by Franchisee, Franchisor, or any of Franchisor's affiliates.
Nothing herein shall prohibit Franchisee or any Principal from owning, solely as an investment, securities of any Person traded on any national securities exchange if neither Franchisee nor any Principal controls, or is a member of a group which controls, such Person and does not, directly or indirectly, own 5% or more of any class of securities of such Person.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, a franchisee faces a post-term non-solicitation restriction. For two years after the termination, expiration, or transfer of the Franchise Agreement, the franchisee and their principals are prohibited from soliciting current or prospective business advertisers of Belocal or its affiliates. This restriction applies regardless of the reason for the termination, expiration, or transfer of the agreement.
The non-solicitation clause specifically targets advertisers with whom the franchisee or their principals interacted during the 12-month period before the agreement's termination. The purpose of this restriction is to prevent franchisees from leveraging their knowledge and relationships gained during the franchise term to unfairly compete with Belocal after the agreement ends. The solicitation includes any form of communication, whether oral, written, or electronic, aimed at offering or accepting goods or services that compete with those of Belocal.
However, there is an exception to this non-solicitation provision. Franchisees or their principals are not prohibited from owning securities of any person traded on a national securities exchange, provided that neither the franchisee nor their principal controls the person, is part of a controlling group, or owns 5% or more of any class of securities of that person. This exception allows franchisees to make passive investments without violating the non-solicitation agreement.
This non-solicitation clause is a standard practice in franchising to protect the franchisor's customer base and proprietary information. Prospective Belocal franchisees should carefully consider the implications of this restriction, especially if they plan to remain in the same industry after leaving the Belocal system. Understanding the scope and duration of the non-solicitation agreement is crucial for future business planning.