For Belocal, what is the duration of the covenant not to compete following the termination of a Covenantor's business relationship with the Franchisee?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
In order to protect the Confidential Information, the Marks, the goodwill of the System, and the legitimate business interests of the Franchised Business, Covenantor agrees that, during the term of his or her business relationship with the Franchisee or the Franchised Business, and for a period of two years following the earlier of (A) the termination of Covenantor's business relationship with Franchisee (regardless of the reason for such termination), or (B) the termination, expiration, or transfer of Franchisee's interest in the Franchise Agreement (regardless of the reason for termination, expiration, or transfer), Covenantor will not, without Franchisor's prior written consent or as permitted under a valid franchise agreement with Franchisor:
- (i) own, operate, or manage any Competitive Business; or
- (ii) engage in, provide, or assist others in engaging in or providing, Competitive Services; or
- (iii) perform any activities for or relating to a Competitive Business, the performance of which is reasonably likely to involve the use or disclosure of Confidential Information, which activity is similar to any activity Covenantor engaged in during the twelve-month period prior to the termination of Covenantor's business relationship with Franchisee or the termination, expiration, or transfer of Franchisee's interest in the Franchise Agreement; provided, however, that nothing herein shall prohibit Covenantor from owning, solely as an investment, securities of any Person traded on any national securities exchange if neither Franchisee nor any Covenantor 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 Covenantor agrees to certain restrictions to protect Belocal's confidential information, trademarks, goodwill, and business interests. Specifically, after the termination of a Covenantor's business relationship with a Belocal franchisee, the Covenantor is restricted from certain activities for a period of two years. This two-year period begins from the earlier of either the termination of the Covenantor's relationship with the franchisee, regardless of the reason, or the termination, expiration, or transfer of the franchisee's interest in the Franchise Agreement, regardless of the reason.
During this two-year period, the Covenantor is prohibited from owning, operating, or managing any Competitive Business, engaging in or assisting others in providing Competitive Services, or performing activities that could lead to the disclosure of confidential information. These restricted activities are similar to those the Covenantor was involved in during the twelve months before their relationship ended with the franchisee or the franchise agreement was terminated.
However, the agreement specifies an exception: the Covenantor is not prohibited from owning securities of any publicly traded company as a passive investment, provided that neither the Covenantor nor anyone affiliated with them controls the company or owns 5% or more of its securities. This clause ensures that Covenantors are not unduly restricted from investment opportunities while still protecting Belocal's business interests.