Can a Boulder Designs franchisee own stock in a publicly-held competitor, and if so, what is the limit?
Boulder_Designs Franchise · 2025 FDDAnswer from 2025 FDD Document
- "Competitive Business" means any business that offers or provides (or grants franchises or licenses to others to operate a business that offers or provides) engraved concrete signage or concrete landscaping products or other products or services that are the same as or similar to those sold by the Franchised Business or in which Trade Secrets or other Confidential Information could be used to the disadvantage of Franchisor, any Affiliate or Boulder Designs' other franchisees; provided, however, that the term "Competitive Business" shall not apply to (a) any business operated by Franchisee under a franchise agreement with Franchisor, (b) any business operated by a publicly-held entity in which Franchisee owns less than a 5% legal or beneficial interest.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2025 FDD)
According to Boulder Designs' 2025 Franchise Disclosure Document, a franchisee can own stock in a publicly-held competitor, but there are limitations. Specifically, the FDD states that the definition of a "Competitive Business" does not apply to any business operated by a publicly-held entity in which the franchisee owns less than a 5% legal or beneficial interest.
This means a Boulder Designs franchisee is permitted to hold a minority stake in a publicly-traded company that might be considered a competitor. However, if the franchisee's ownership exceeds 5%, the company would then be considered a "Competitive Business," which could trigger other restrictions or obligations under the franchise agreement.
This clause aims to prevent franchisees from having a significant financial interest in a direct competitor, which could create conflicts of interest or disincentivize them from fully committing to their Boulder Designs franchise. The 5% threshold is a common benchmark used in franchise agreements to distinguish between passive investments and potentially influential ownership positions.