Are digital marketing and advertising services offered by Belocal franchisees considered a 'Competitive Service'?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
. 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;
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, offering or selling digital marketing and advertising services that Belocal or its affiliates offer is considered a 'Competitive Service.' This definition applies both during the term of the franchise agreement and, for post-term covenants, within the twelve-month period before termination, expiration, or transfer of the agreement. This means that during the franchise term and for one year after leaving the Belocal system, a franchisee is restricted from providing digital marketing and advertising services that compete with those offered by Belocal.
This restriction is part of a broader definition of 'Competitive Business,' which includes various activities related to selling or publishing digital and print advertising that competes with Belocal's publications. These activities range from direct sales to developing relationships and organizing events aimed at marketing competing publications. The purpose of these restrictions is to protect Belocal's market position and prevent franchisees from leveraging their knowledge and resources gained within the Belocal system to directly compete against it.
For a prospective franchisee, this non-compete clause has significant implications. It limits their ability to engage in similar business activities, specifically offering digital marketing and advertising services, both during the franchise term and for a year afterward. This could affect their future business opportunities and potentially limit their income if they choose to leave the Belocal franchise. Franchisees should carefully consider these restrictions and how they align with their long-term business goals and exit strategies.
Belocal states that these covenants contain reasonable limitations regarding time, geographical area, and scope of activity. They assert that these restrictions do not impose a greater restraint than necessary to protect Belocal's goodwill or legitimate business interests. However, the reasonableness of such restrictions can sometimes be challenged in court, and the outcome may depend on specific circumstances and local laws. Therefore, prospective franchisees should seek legal advice to fully understand the implications of these non-compete clauses in their specific jurisdiction.