During the franchise relationship with C3 Wellness Spa, what constitutes a 'Prohibited Activity'?
C3_Wellness_Spa Franchise · 2024 FDDAnswer 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, 'Prohibited Activities' during the term of the Franchise Agreement include several forms of competitive behavior. These restrictions are designed to protect C3 Wellness Spa's market position and brand integrity.
Specifically, a franchisee is prohibited from owning or having a legal or equitable interest in a Competitive Business, whether as a sole proprietor, owner, partner, member, or shareholder of a Corporate Entity. However, owning 3% or less of a publicly traded company that is a Competitive Business is an exception. Franchisees are also barred from operating, managing, funding, or performing services for a Competitive Business in any capacity, including as an employee, officer, director, manager, consultant, representative, agent, or creditor.
Furthermore, franchisees cannot divert or attempt to divert business or customers from C3 Wellness Spa, its affiliates, or other franchisees. Inducing any customer or client of C3 Wellness Spa, its affiliates, or franchisees to another business that is not a C3 Wellness Spa is also prohibited. Engaging in any actions, inactions, or activities that violate specific articles within the agreement related to non-competition is also considered a 'Prohibited Activity'. These restrictions also apply to the franchisee's Owners and Spouses, who must sign a Franchise Owner and Spouse Agreement and Guaranty.
Engaging in these 'Prohibited Activities' is considered unfair competition and would cause harm to C3 Wellness Spa, the System, and other Spas and/or Spa Location Franchises. These measures are in place to ensure that franchisees remain committed to the C3 Wellness Spa system and do not use their knowledge or resources gained from the franchise to benefit competing businesses.