For C3 Wellness Spa, does the in-term non-competition agreement apply to the franchisee's owners and spouses?
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, the in-term non-competition agreement does indeed apply to the franchisee's owners and spouses. During the term of the Franchise Agreement, the franchisee, their owners, and their spouses are prohibited from engaging in "Prohibited Activities." These activities include owning or having a legal or equitable interest in a Competitive Business (with a minor exception of owning 3% or less in a publicly traded company), operating, managing, funding, or performing services for a Competitive Business, diverting business or customers from C3 Wellness Spa, and inducing customers to other businesses that are not a C3 Wellness Spa.
This means that if you are considering becoming a C3 Wellness Spa franchisee, not only will you be restricted from engaging in competitive business activities, but your owners and spouses will also be bound by these restrictions. To ensure compliance, the franchisee's owners and spouses must each execute and deliver to C3 Wellness Spa the Franchise Owner and Spouse Agreement and Guaranty, which is attached to the Franchise Agreement as Exhibit 1.
These restrictions are designed to protect C3 Wellness Spa's interests, the System, and other franchisees from unfair competition. The FDD states that engaging in prohibited activities would be considered unfair competition and would cause harm to C3 Wellness Spa and its franchisees. Franchisees should carefully review Exhibit 1 to fully understand the scope and implications of these non-competition obligations for themselves, their owners, and their spouses.