What is the exception to the non-compete agreement for Belocal Covenantors regarding the ownership of securities?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
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, the non-compete agreement does not prohibit a Covenantor from owning securities of a publicly traded company under specific conditions. This exception allows Covenantors to invest in companies listed on a national securities exchange, provided that such ownership is solely for investment purposes.
Specifically, the Covenantor, either individually or as part of a group, must not control the company in which they are investing. Furthermore, the Covenantor's direct or indirect ownership cannot exceed 5% of any class of the company's securities. This provision ensures that the Covenantor's investment remains passive and does not lead to any influence or control over a competing business.
For a prospective Belocal franchisee, this means they can invest in publicly traded companies, even those that might be considered competitive, as long as they adhere to the outlined restrictions. This exception provides an opportunity for personal investment without violating the non-compete obligations, offering some financial flexibility while remaining compliant with the franchise agreement.