factual

For C3 Wellness Spa, is diverting customers from the franchisor considered a 'Prohibited Activity'?

C3_Wellness_Spa Franchise · 2024 FDD

Answer from 2024 FDD Document

Franchisee agrees that during the Term of this Agreement, Franchisee shall not engage in the following activities (the "Prohibited Activities"): (a) owning and/or having any legal or equitable interest whether, as an individual proprietor, owner, partner, member or shareholder of a Corporate Entity, or, in any similar capacity, in a Competitive Business other than, owning an interest of 3% or less in a publicly traded company that is a Competitive Business; (b) operating, managing, funding and/or performing services whether, as an employee, officer, director, manager, consultant, representative, agent, and/or creditor or, in any similar capacity, for or benefitting a Competitive Business; (c) diverting or attempting to divert any business or customers from Franchisor or, one of Franchisor's affiliates or franchisees; (d) inducing any customer or client of Franchisor, Franchisor's affiliates, franchisees of the System, or, of Franchisee, to any other person or business that is not a Spa and/or Spa Location Franchise; and/or (e) engaging in any actions, inactions, and/or activities in violation of Articles 6.B. and/or 6.C. of this Agreement (all, individually and, collectively, referred to as the "Prohibited Activities"). Franchisee agrees that if Franchisee were to engage in the Prohibited Activities that such actions would be unfair, would constitute unfair competition and would cause harm to Franchisor, the System and other Spas and/or Spa Location Franchises. Franchisee agrees that the foregoing covenants and obligations shall also apply to Franchisee's Owners and Spouses and that Franchisee's Owners and Spouses shall each execute and deliver to Franchisor the Franchise Owner and Spouse Agreement and Guaranty in the form attached to this Agreement as Exhibit 1.

Source: Item 23 — RECEIPTS (FDD pages 59–293)

What This Means (2024 FDD)

According to C3 Wellness Spa's 2024 Franchise Disclosure Document, diverting or attempting to divert customers from the franchisor, its affiliates, or franchisees is explicitly defined as a 'Prohibited Activity.' This restriction is in place during the term of the Franchise Agreement.

This means that a C3 Wellness Spa franchisee is contractually obligated not to take any actions aimed at drawing business or customers away from the franchisor's network. This includes not only the franchisor itself but also any affiliated entities or other franchisees within the C3 Wellness Spa system. Such actions are considered unfair competition and a breach of the agreement.

The FDD specifies that engaging in 'Prohibited Activities' can result in harm to the franchisor, the C3 Wellness Spa system, and other franchisees. This clause protects the integrity of the franchise network and ensures that franchisees are focused on growing their business within the established framework, rather than attempting to undermine the system for individual gain. Franchisees should be aware that this restriction is a significant part of their contractual obligations and that violations can have serious consequences.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.