What are the specific covenants outlined in Article 16 that a Canine Dimensions franchisee must comply with?
Canine_Dimensions Franchise · 2025 FDDAnswer from 2025 FDD Document
16.3 Exceptions to Covenants
Section 16.2 shall not apply to ownership by Franchisee of less than a five percent (5%) beneficial interest in the outstanding equity securities of any publicly-held corporation.
16.4 Severability; Tolling
The parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement. If all or any portion of a covenant in this Section 16 is held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which Franchisor is a party, Franchisee expressly agrees to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Article 16. Any period of time specified in this Article 16 will be tolled and suspended for any period of time during which Franchisee is in violation of any restrictive covenant.
16.5 Amendment of Covenants
Franchisee understands and acknowledges that Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant in Section 16.2, or any portion of it, without Franchisee's consent, effective immediately upon receipt by Franchisee of written notice of a reduction; and Franchisee agrees that it will immediately begin complying with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Article 21.
16.6 Enforcement of Covenants
Franchisee agrees that the existence of any claims it may have against Franchisor, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by Franchisor of the covenants in this Article 16. Franchisee agrees to pay all costs and expenses (including reasonable attorney's fees) incurred by Franchisor in connection with enforcing this Article 16.
16.7 Violation of Covenants
Franchisee acknowledges that Franchisee's violation of the terms of this Article 16 would result in irreparable injury to Franchisor for which no adequate remedy at law may be available, and Franchisee accordingly consents to Franchisor's application for an injunction prohibiting any conduct by Franchisee in violation of the terms of this Article 16.
Source: Item 22 — CONTRACTS (FDD page 36)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, Article 16 of the Canine Dimensions franchise agreement outlines covenants related to post-termination obligations and restrictions on competition. While the document mentions compliance with Article 16 upon termination, it does not explicitly detail the specific covenants contained within Section 16.2. However, it does state that these covenants can be reduced in scope by Canine Dimensions without the franchisee's consent.
Several clauses address the enforcement and interpretation of these covenants. The agreement specifies that any claims a franchisee may have against Canine Dimensions do not constitute a defense against the enforcement of Article 16. Additionally, franchisees agree to cover all costs and expenses, including attorney's fees, incurred by Canine Dimensions in enforcing this article. The document also notes that violating Article 16 would cause irreparable injury to Canine Dimensions, entitling them to seek an injunction against the franchisee.
The FDD also mentions exceptions to these covenants, stating that Section 16.2 does not apply to ownership of less than a 5% beneficial interest in the equity securities of any publicly-held corporation. The agreement also includes provisions for severability and tolling, ensuring that each covenant is construed independently and that any violation suspends the time period specified in Article 16.
Because the specific details of the covenants within Section 16.2 are not provided in the excerpts, prospective franchisees should carefully review the full Franchise Agreement and seek clarification from Canine Dimensions regarding the exact nature and scope of these restrictions. Understanding these covenants is crucial, as they govern the franchisee's conduct both during and after the franchise agreement term, and violations can have significant legal and financial repercussions.