Are non-competition covenants applicable during the term of the C3 Wellness Spa Multi-Unit Development Agreement?
C3_Wellness_Spa Franchise · 2024 FDDAnswer from 2024 FDD Document
| g. | "Cause" defined-curable | Not | Not applicable. | |----|----------------------------------------------------------------------------|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | defaults | applicable | | | h. | "Cause" defined-non-curable defaults | 3.2 | Your Multi-Unit Development Agreement can be terminated by us if: (a) you abandon your obligations under the Multi-Unit Development Agreement; (b) if you for four consecutive months, or any shorter period that indicates an intent by you to discontinue your development of Spa Location Franchises within the Development Area; (c) if you become insolvent or you are adjudicated bankrupt, or if any action is taken by you, or by others against you, under any insolvency, bankruptcy or reorganization act, or if you make an assignment for the benefit or creditors or a receiver is appointed by you; (d) if you fail to meet your development obligations under the Development Schedule for any single Development Period including, but not limited to, your failure to establish, open and/or maintain the cumulative number of Spa Location Franchises in accordance with Development Schedule; and/or (e) in the event that any one Franchise Agreement is terminated respecting any Spa Location Franchise and/or any other Franchise Agreement with us. | | i. | Franchisee's obligations on termination/non-renewal | Not applicable | You lose all rights under the Multi-Unit Development Agreement. There are no renewal rights respecting the Multi-Unit Development Agreement. | | j. | Assignment of the contract by franchisor | 6 | There are no restrictions on our right to assign. | | k. | "Transfer" by franchisee definition | 6 | You have no right to transfer the Multi-Unit Development Agreement. | | l. | Franchisor's approval of transfer by franchisee | 6 | You have no right to transfer the Multi-Unit Development Agreement. | | m. | Conditions for franchisor's approval of transfer | 6 | You have no right to transfer the Multi-Unit Development Agreement. | | n. | Franchisor's right of first refusal to acquire franchisee's business | Not applicable | Not applicable. | | o. | Franchisor's option to purchase franchisee's business | Not applicable | Not applicable. | | p. | Death or disability of franchisee | Not applicable | Not applicable. |
| q. | Non-competition covenants during the term of the franchise | Not applicable | Not applicable as to Multi-Unit Development Agreement. However, each Spa Location Franchise developed pursuant to Multi-Unit Development Agreement will be subject to non-competition covenants set forth in each respective Franchise Agreement. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 43–50)
What This Means (2024 FDD)
According to C3 Wellness Spa's 2024 Franchise Disclosure Document, non-competition covenants are not applicable during the term of the Multi-Unit Development Agreement itself. However, this does not mean there are no restrictions.
Each individual Spa Location Franchise developed under the Multi-Unit Development Agreement will be subject to the non-competition covenants outlined in its respective Franchise Agreement. This means that while the overarching development agreement isn't restricted by non-compete terms, each spa location you open will have its own set of rules regarding competitive activities during its operation.
This distinction is important for prospective multi-unit franchisees. While you can develop multiple locations, each location will have its own non-compete obligations. You should carefully review the Franchise Agreement for each spa location to understand the specific restrictions that will apply during the term of that franchise. This includes understanding what constitutes a 'competitive business' and the geographic scope of the non-compete, as detailed in the individual franchise agreements.