What is the significance of the mutual covenants in the Belocal agreement?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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.
- X.
Continuing Obligations.
Franchisee and Franchisee's Principals make the foregoing representations, warranties, and covenants understanding that such representations, warranties, and covenants are continuing obligations.
Franchisee agrees to cooperate with Franchisor to verify the continuing compliance of Franchisee and its Principals with such representations, warranties, and covenants.
Any failure to comply with these representations, warranties, and covenants shall constitute a material event of default under this Agreement.
- Y.
Background Checks.
Franchisor has the right to obtain background checks on Franchisee and its Principals.
- Z.
Crisis.
Franchisee shall notify Franchisor immediately upon the occurrence of any situation that may have a significant negative impact on Franchisee, Franchisor, the Publication, or which could have a deleterious effect on the BELOCAL brand, Marks or System (a "Crisis").
Franchisee shall cooperate fully with Franchisor with respect to Franchisor's response to any Crisis and shall follow all of Franchisor's policies, procedures, and instructions in every such situation, including, without limitation, instructions regarding managing public relations and communications, as directed by Franchisor or as specified in the Franchise Brand Standards Manual and regardless of whether Franchisee has retained outside counsel or a public relations firm to assist with any such matter.
A "Crisis" includes, but is not limited to, any event that occurs in connection with the Franchised Business or Publication that has or may cause harm or injury to the public, advertisers, or Independent Staff.
In the event of the occurrence of a Crisis, Franchisor may establish emergency procedures which may require Franchisee to temporarily cease publishing the Publication, in which case Franchisor shall not be liable to Franchisee for any loss or costs, including consequential damages or lost profits occasioned thereby.
Franchisor shall have the right to take control of the management of communications if Franchisor determines that the publicity surrounding the event is likely to have a material adverse effect on the reputation or goodwill of the Franchised Business, Publication, Marks, System, or Franchisor.
- (C) The term "Confidential Information" means information and know-how, oral, visual, or written, and documents relating to Franchisor, its affiliates, the Franchised Business, and any publication Furnished by Franchisor or its affiliates, or representatives of Franchisor, to Covenantor.
Franchisor's Confidential Information includes, without limitation, all trademarks, trade names, service marks, emblems, and indicia of origin used by Franchisor in connection with the operation of the Franchised Business, and all trade secrets or know-how, including, but not limited to, research, plans, products, services, customer lists, supplier information, advertisers, business plans, marketing data and materials, software, electronic code, forms, processes, methods of operation, strategic information, financial information, manuals, and other business information disclosed to Covenantor by Franchisor or its representatives, as well as any data stored on or within the information technology systems of Franchisor or any of its affiliates.
- (A) Each of the covenants herein 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 business interests of Franchisor.
- (B) Each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement.
- (B) Each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Agreement is held unreasonable or unenforceable by a court or agency having valid jurisdiction in any unappealed final decision to which Franchisor is a party, Covenantor shall be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Agreement.
No term of this Agreement shall be deemed to restrict Covenantor's ability to communicate with government agencies and officials regarding the Franchised Business.
- (C) In the event of a breach of this Agreement, Franchisor would be irreparably injured and without an adequate remedy at law and, therefore, upon any such breach or attempted breach of any provision hereof, Franchisor shall be entitled, in addition to any other remedies which it may have at law or in equity, to a temporary and/or permanent injunction and a decree for the specific performance of the terms of this Agreement, without the necessity of showing actual or threatened harm and without being required to furnish a bond or other security.
The time periods relating to the obligations described in this Agreement will be tolled during any period of noncompliance.
Covenantor agrees to pay all expenses (including court costs and reasonable attorneys' fees and costs) incurred by Franchisor in enforcing this Agreement.
Any failure by Franchisor to object to or take action with respect to any breach of any provision of this Agreement by Covenantor will not operate or be construed as a waiver of or consent to that breach or any subsequent breach by Covenantor.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO TEXAS CONFLICT OF LAW PRINCIPLES.
COVENANTOR HEREBY IRREVOCABLY SUBMITS HIMSELF OR HERSELF TO THE JURISDICTION OF THE STATE AND FEDERAL DISTRICT COURTS LOCATED IN THE STATE, COUNTY, OR JUDICIAL DISTRICT IN WHICH FRANCHISOR'S PRINCIPAL PLACE OF BUSINESS IS LOCATED.
COVENANTOR HEREBY WAIVES ALL QUESTIONS OF PERSONAL JURISDICTION OR VENUE FOR THE PURPOSE OF CARRYING OUT THIS PROVISION.
(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.
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the mutual covenants within the franchise agreement are designed to protect Belocal's brand, confidential information, and business interests. These covenants place specific restrictions on the franchisee, both during the term of the agreement and after its termination, expiration, or transfer. The franchisee agrees that these limitations are reasonable in terms of time, geographical area, and scope of activity, and are necessary to safeguard Belocal's goodwill and legitimate business interests. These covenants ensure the franchisee's ongoing compliance and cooperation with Belocal.
Specifically, the covenants address competitive business activities. A franchisee is restricted from engaging in activities that directly compete with Belocal, such as selling digital or print advertising for competing publications, publishing competing publications, developing relationships to market competing publications, organizing events for competing publications, or offering digital marketing and advertising services similar to those offered by Belocal. These restrictions apply within the franchisee's territory and sometimes extend to a ten-mile radius around it. The definition of 'Competitive Business' is carefully outlined to include specific services that the franchised business provides, ensuring clarity and enforceability.
The FDD also emphasizes the importance of confidential information, defining it broadly to include trademarks, trade names, service marks, trade secrets, research, plans, products, services, customer lists, supplier information, business plans, marketing data, software, and financial information. The franchisee acknowledges that access to this confidential information is necessary for their role and agrees to protect it. Furthermore, the agreement outlines procedures for handling crises that could negatively impact Belocal's brand or reputation, requiring the franchisee to immediately notify Belocal and cooperate fully with their response, including following instructions on managing public relations and communications. Failure to comply with these covenants constitutes a material breach of the agreement, potentially leading to default.
Belocal retains the right to conduct background checks on the franchisee and its principals, reinforcing the importance of trust and integrity in the franchise relationship. The agreement is governed by Texas law, and the franchisee submits to the jurisdiction of Texas courts. In the event of a breach, Belocal is entitled to injunctive relief and specific performance, and the franchisee is responsible for covering all expenses, including legal fees, incurred by Belocal in enforcing the agreement. These covenants collectively create a framework that protects Belocal's interests while providing a structure for the franchisee to operate within, ensuring the continued success and integrity of the Belocal franchise system.