Is owning or operating a Competitive Business a 'Prohibited Activity' for Beverly Anns Cookie franchisees?
Beverly_Anns_Cookie Franchise · 2025 FDDAnswer from 2025 FDD Document
"Prohibited Activities" means any or all of the following: (i) owning, operating, or having any other interest (as an owner, partner, director, officer, employee, manager, consultant, shareholder, creditor, representative, agent, or in any similar capacity) in a Competitive Business (other than owning an interest of five percent (5%) or less in a publicly-traded company that is a Competitive Business); (ii) diverting or attempting to divert any business from us (or one of our affiliates or franchisees); and/or (iii) inducing or attempting to induce any customer of ours (or of one of our affiliates or franchisees) to transfer their business to you or to any other person that is not then a franchisee of ours.
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"Competitive Business" means any business that: (i) operates as a mobile or temporary location vendor primarily serving food and/or beverages or selling retail merchandise or services from a vehicle, kiosk or other moveable property; (ii) sells or offers to sell products or services that are the same as or similar to the type of products sold by (A) the Franchised Business as the concept evolves over time; including but not limited to cookies and ice cream or similar products, or (B) us, our affiliates or our or their respective franchisees or licensees including without limitation, as of the date of this Franchise Agreement, shaved ice, blended beverages, snow cones, ice cream, frozen desserts, coffee, tea, hot or cold beverages; (iii) provides or offers to provide services the same as or similar to the type of services sold by you; or (iv) any business that grants franchises or licenses to others to operate the types of businesses specified in subparagraphs (i) through (iii) above, but excludes a Franchised Business operating under a franchise agreement with us or our affiliates. A Competitive Business shall not include ownership of up to five percent (5%) of any publicly held company or mutual fund that owns, operates, has an interest in, or controls any business that otherwise would meet the definition of a Competitive Business.
Source: Item 22 — CONTRACTS (FDD page 57)
What This Means (2025 FDD)
According to Beverly Anns Cookie's 2025 Franchise Disclosure Document, owning or operating a Competitive Business is considered a 'Prohibited Activity' for franchisees. A 'Competitive Business' is defined as any business that operates as a mobile vendor serving food or beverages, sells similar products to Beverly Ann's Cookie (such as cookies and ice cream), offers similar services, or franchises similar businesses. However, owning up to 5% of a publicly held company that might be considered a 'Competitive Business' is an exception to this rule.
Specifically, 'Prohibited Activities' include owning, operating, or having any interest in a Competitive Business, diverting business from Beverly Ann's Cookie, or inducing customers to transfer their business away from Beverly Ann's Cookie. This restriction applies while the franchisee is operating a Beverly Ann's Cookie business and may extend beyond the term of the franchise agreement.
This means that as a Beverly Anns Cookie franchisee, you are significantly restricted from engaging in any competing business activities. This includes direct ownership, employment, or any other form of involvement in a business that offers similar products or services. The restriction is in place to protect Beverly Ann's Cookie's market share, trade secrets, and overall business interests. Franchisees should carefully consider these limitations and how they might affect future business opportunities before investing in a Beverly Ann's Cookie franchise.
The definition of 'Competitive Business' is broad, covering various aspects of potential competition, including mobile vendors, similar products, and franchising of similar concepts. The exception for owning a small percentage of a publicly traded company provides a minor allowance for investment diversification without active involvement in a competing business. Franchisees must be aware that engaging in 'Prohibited Activities' can lead to legal consequences, including injunctive relief, as outlined in the franchise agreement.