What is the scope of the in-term covenant not to compete for a Byrider franchisee?
Byrider Franchise · 2025 FDDAnswer from 2025 FDD Document
18.1 In-Term Covenant Not To Compete.
Franchisee and its owners agree that, during this Agreement's term, neither Franchisee, nor any owner, nor any member of Franchisee's or an owner's immediate family will:
- (a) have any direct or indirect, controlling or non-controlling interest as an owner (whether of record, beneficial or otherwise) in, or as a landlord of, a Competitive Business (defined below), wherever located or operating;
- (b) perform services as a director, officer, manager, employee, consultant, representative or agent, or in any other capacity, for a Competitive Business, wherever located or operating;
- (c) recruit or hire any employee of Company, Company's affiliates or Company's franchisees without obtaining prior written permission from such employer; or
- (d) divert or attempt to divert any actual or potential business or customer of the Franchisee's Business to a Competitive Business.
The term "Competitive Business" means any business (other than a Business being operated pursuant to a franchise agreement with the Company) which: (i) offers leasing or sells used automobiles, while retaining the retail installment contract or lease, (ii) operates itself as a provider of buy here pay here or lease financing whereby the selling dealer who originates retail installment contracts or leases and the assignee of the retail installment contracts or leases have some common equity ownership; (iii) provides vehicle repair services; or (iv) grants franchises or licenses to operate a business covered by the terms of (i), (ii) or (iii) of this subsection.
Source: Item 23 — Receipts (FDD pages 88–335)
What This Means (2025 FDD)
According to the 2025 Byrider Franchise Disclosure Document, during the term of the Franchise Agreement, the franchisee, its owners, and their immediate family members are restricted from engaging in competitive business activities. This means they cannot have any ownership interest in, or act as a landlord for, a Competitive Business, regardless of its location. They are also prohibited from working for a Competitive Business as a director, officer, manager, employee, consultant, representative, or agent.
Furthermore, Byrider franchisees are barred from recruiting or hiring employees of Byrider, its affiliates, or other Byrider franchisees without prior written permission. They are also prohibited from diverting or attempting to divert any actual or potential business or customers of the franchisee's Byrider Business to a Competitive Business.
The term "Competitive Business" is defined broadly to include any business that offers leasing or sells used automobiles while retaining the retail installment contract or lease, operates as a provider of buy here pay here or lease financing with common equity ownership between the selling dealer and the assignee of the retail installment contracts or leases, provides vehicle repair services, or grants franchises or licenses to operate a business covered by the terms mentioned above. This comprehensive definition ensures that Byrider franchisees and their related parties cannot participate in any business that directly competes with the Byrider franchise during the term of the agreement.
This in-term covenant not to compete is fairly standard in franchising, as franchisors seek to protect their brand, customer base, and proprietary information. Prospective Byrider franchisees should carefully consider the scope of these restrictions and ensure they do not conflict with any existing business interests or future plans. It is also important to understand the definition of "Competitive Business" to avoid any unintentional violations of the covenant.