Can a Bombs Away franchisee's owner lend money to a competitor during the term of the agreement?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
- (a) Restriction In Term.
During the term of the Franchise Agreement, Guarantor shall not directly or indirectly have any ownership interest in, lend money or provide financial assistance to, provide any services to, or be employed by, any Competitor.
- (b) Restriction Post Term.
For two years after the Franchise Agreement expires or is terminated for any reason (or, if applicable, for two years after a Transfer by Guarantor), Guarantor shall not directly or indirectly have any ownership interest in, lend money or provide financial assistance to, provide any services to, or be employed by, any Competitor operating in any of Franchisee's Territory or the territory of any other Bombs Away business operating on the date of termination or transfer, as applicable.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to the 2024 Bombs Away Franchise Disclosure Document, if a franchisee is an entity, each owner must sign a personal guarantee. During the term of the Franchise Agreement, the guarantor is prohibited from lending money or providing financial assistance to any competitor, whether directly or indirectly. This restriction is in place to protect Bombs Away's business interests and prevent owners from supporting competing businesses while they are still affiliated with the Bombs Away franchise.
This restriction extends beyond simply owning or working for a competitor; it also includes providing financial support. This is a fairly standard practice in franchising, as franchisors want to prevent franchisees from using their resources to benefit rival businesses.
After the franchise agreement expires or is terminated, the guarantor is still restricted from lending money or providing financial assistance to a competitor for two years. This post-term restriction applies within the franchisee's territory or the territory of any other Bombs Away business operating on the date of termination or transfer. This ensures that former franchisees do not immediately leverage their knowledge and resources gained from Bombs Away to support competing businesses in the same market.