Is a Bevaris Alliance franchisee allowed to be a shareholder in a competing business after the agreement terminates?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
- 20.1 In order to protect the Confidential Information, trade secrets and business connections of the Franchisor and the Franchisor's other franchisees, the Franchisee and the Individual covenant with the Franchisor that they shall not:
- (a) during the Term or for 24 months after termination or expiration of this agreement, solicit or endeavor to entice away from the Franchisor or any other franchisee of the Franchisor the business or custom of a Restricted Customer with a view to providing goods or services to that Restricted Customer in competition with any Restricted Business; or
- (b) during the Term or for 24 months after termination or expiration of this agreement, in the course of any business concern which is in competition with or similar to the Branded Business or any business of the Franchisor or any Restricted Business, offer to employ or engage, or otherwise endeavor to entice away, any employee of the Franchisor or any other franchisee of the Franchisor who could materially damage the interests of the Franchisor or any other franchisee of the Franchisor, and with whom the Franchisee or the Individual dealt in the 24 months prior to termination of this agreement; or
- (c) during the Term, or for 24 months after termination or expiration of this agreement, be involved as agent, consultant, director, employee, owner, partner or shareholder with any business concern which is (or intends to be) in competition with any Restricted Business; or
- (d) during the Term, or for 24 months after termination of this agreement, be involved with the provision of goods or services to (or otherwise have any business dealings with) any Restricted Customer in the course of any business concern which is in competition with any Restricted Business; or
- (e) at any time after termination of this agreement, represent himself as connected, in any way, with the Franchisor.
- 20.2 None of the restrictions in clause 20.1 shall prevent the Franchisee or Individual from:
- (a) holding an investment by way of shares or other securities of not more than 5% of the total issued share capital of any company, whether or not it is listed or dealt in on a recognized stock exchange; or
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
According to the 2024 Bevaris Alliance Franchise Disclosure Document, there are restrictions on a franchisee's involvement with competing businesses both during the term of the agreement and for a period of time after termination or expiration. Specifically, for 24 months after the agreement ends, a franchisee cannot be involved as an agent, consultant, director, employee, owner, partner, or shareholder with any business concern that competes with any Restricted Business. This restriction is designed to protect Bevaris Alliance's confidential information, trade secrets, and business connections, as well as those of its other franchisees.
However, there is an exception to this restriction. A Bevaris Alliance franchisee or the individual associated with the franchise is permitted to hold an investment in shares or other securities of not more than 5% of the total issued share capital of any company, regardless of whether that company is listed or dealt with on a recognized stock exchange. This exception allows for minor investments without violating the non-compete clause.
In practical terms, this means that a former Bevaris Alliance franchisee is significantly limited in their ability to participate in a competing business for two years after their franchise agreement ends. They cannot take on any active role or ownership position beyond a very small investment. This is a fairly standard practice in franchising to prevent franchisees from using the knowledge and experience gained during their franchise term to directly compete with the franchisor or other franchisees in the system. Prospective franchisees should carefully consider these restrictions and how they might impact their future business opportunities before entering into a franchise agreement with Bevaris Alliance.