How does Belocal define a 'Competitive Business' in the context of the franchise agreement?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
- (2) Competitive Business.
The term "Competitive Business" includes the following divisible and severable business lines or services (each a "Competitive Service") which the Franchisee's Franchised Business provided (a) for covenants applicable during the Term, during the Term and (b) for covenants applicable post-term, at any time within the twelve-month period prior to the termination, expiration, or transfer of this Agreement:
(i) selling digital and/or print advertising to businesses for publication in or related to digital or print publications that compete with any N2 publication(s), including BELOCAL publications;
(ii) publishing and/or facilitating the publishing of digital or print publications that compete with any N2 publication(s), including BELOCAL publications;
(iii) developing relationships among members of Communities within the Territory, or members of Industry Groups within the Territory and within ten miles of the Territory, for the purpose of selling or marketing digital or print publications that compete with any N2 publication(s), including BELOCAL publications;
(iv) organizing, sponsoring, or hosting events for advertisers in the Publication or members of Communities within the Territory, or members of Industry Groups within the Territory and within ten miles of the Territory, for the purpose of selling or marketing digital or print publications, or digital or print advertising in digital or print publications, that compete with any N2 publication(s); or
(v) offering or selling digital marketing and advertising services which are offered or sold by Franchisor or its affiliates or are or were offered and sold by Franchisee.
H.
Reasonableness of Covenants.
Franchisee and Principals agree that the preceding covenants contain reasonable limitations as to time, geographical area, and scope of activity to be restrained and do not impose a greater restraint than is necessary to protect the goodwill or other legitimate business interests of Franchisor.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, a 'Competitive Business' is defined in the franchise agreement as any business that competes with Belocal's core services. This definition is crucial because it outlines the activities a franchisee is restricted from engaging in during the term of the agreement and for a specified period after termination, expiration, or transfer of the franchise. The restrictions are designed to protect Belocal's market position and confidential information.
Specifically, a 'Competitive Business' includes selling digital or print advertising for publications that compete with Belocal, publishing or facilitating the publishing of competing publications, and developing relationships to market competing publications. It also encompasses organizing events for advertisers or community members to market competing publications, and offering or selling digital marketing and advertising services that Belocal or its affiliates offer. These restrictions apply both during the term of the franchise agreement and, for a period of twelve months prior to the termination, expiration, or transfer of the agreement.
The franchise agreement also addresses the reasonableness of these non-compete covenants, stating that the limitations on time, geographical area, and scope of activity are considered reasonable to protect Belocal's goodwill and legitimate business interests. This suggests that Belocal has considered the potential impact on franchisees and has attempted to balance the need for protection with the franchisee's ability to earn a livelihood after leaving the system. However, the agreement also includes provisions that adjust the restricted territory based on legal determinations of what is considered too broad, potentially reducing the scope of the non-compete obligations.
Prospective franchisees should carefully review these definitions and restrictions to understand the full scope of their obligations. It is important to consider how these limitations might affect their future business opportunities, especially if they decide to exit the Belocal system. Understanding these terms is essential for making an informed decision about investing in a Belocal franchise.