Following termination of my C3 Wellness Spa franchise, what geographic limitations apply to the non-competition agreement?
C3_Wellness_Spa Franchise · 2024 FDDAnswer from 2024 FDD Document
"Competitive Business" refers to and means any business that is the same as or similar to a Spa Location Franchise and/or a Spa including, but not limited to a business that offers or provides either: (a) facial treatment services, medical spa services, IV vitamin therapy, massage therapy services,
physical therapy, cosmetic services, topical skin treatments, essential oils, and other spa services, and any business and/or other businesses that offers, sells, and/or provides products and/or services similar to the Approved Spa Products and Services that are authorized and designated by us and, as we may designate from time to time in the future; or (b) administration, management and/or marketing services for any business that offers or provides facial treatment services, medical spa services, IV vitamin therapy, massage therapy services, physical therapy, cosmetic services, topical skin treatments, essential oils, and other spa services, and any business and/or other businesses that offers, sells, and/or provides products and/or services similar to the Spa Facility and Management and Services that are authorized and designated by us and, as we may designate from time to time in the future and designated by us as of the Effective Date of this Agreement and, as we may designate from time to time in the future.
"Prohibited Activities" refers to and means any or all of the following: (a) owning and/or having any legal or equitable interest whether, as an individual proprietor or as an 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 a Competitive Business; (c) diverting or attempting to divert any business or customers from us (or one of our affiliates or franchisees); and/or (d) inducing any customer or client of ours (or of one of our affiliates or franchisees) or of Franchisee to any other person business that is not an C3 Wellness.
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.
Chapter 49.62 RCW limits the use of non-competition agreements and may supersede the Franchise Agreement's non-competition provisions. Washington law provides as follows: (1) an employee noncompete covenant is unenforceable unless the employee's annual earnings exceed $100,000; (2) a presumption is created that any non-compete covenant with a duration longer than 18 months is unreasonable and unenforceable; (3) a franchisor may not restrict, restrain or prohibit a franchisee from soliciting or hiring any employee of the franchisor or a franchisee of the same franchisor; (4) any contractual provision that requires an employee to adjudicate a non-competition covenant outside of Washington State is void and unenforceable."
Source: Item 23 — RECEIPTS (FDD pages 59–293)
What This Means (2024 FDD)
Based on the 2024 C3 Wellness Spa Franchise Disclosure Document, the specific geographic limitations of the post-termination non-competition agreement are not detailed in the provided excerpts. However, the excerpts do define what constitutes a "Competitive Business" and "Prohibited Activities" which are relevant to understanding the scope of the non-compete. A Competitive Business includes businesses offering similar spa services, while Prohibited Activities include owning, operating, or providing services to a Competitive Business.
While the excerpts do not specify the geographic area covered by the non-compete, they do mention the franchisee's "Designated Territory." The franchisor may prohibit a franchisee from soliciting customers outside of their Designated Territory. The excerpts also state that franchisees may face competition from other C3 Wellness Spa franchises and System franchisees located adjacent to or in close proximity to the franchisee's location or Designated Territory. This suggests that the Designated Territory plays a role in defining the competitive landscape, but the exact geographic scope of the post-termination non-compete is not explicitly stated.
Given the lack of specific details about geographic limitations, it is essential for a prospective C3 Wellness Spa franchisee to carefully review the full franchise agreement and related exhibits, particularly those sections addressing restrictive covenants and post-termination obligations. Franchisees in Washington State should note that Chapter 49.62 RCW limits the use of non-competition agreements and may supersede the Franchise Agreement's non-competition provisions. It would be prudent to seek clarification from C3 Wellness Spa regarding the precise geographic scope of the non-compete and how it applies in practice, especially in relation to the franchisee's Designated Territory and potential competition from other franchisees.