What are the consequences if a Caring Transitions franchisee fails to maintain the confidentiality of trade secrets?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
er, director or manager. If Covenantor has more than one relationship with Franchisee (e.g., Covenantor is both a Principal and an officer of Franchisee), "the termination of Covenantor's relationship with Franchisee" occurs upon the termination of Covenantor's last relationship with Franchisee.
-
- The parties agree that the full extent of the damages that Franchisor will incur if a Covenantor fails to comply with their obligations under section 3 or 4 is difficult to ascertain, but the parties nevertheless desire certainty in this matter. Accordingly, if a Covenantor breaches or fails to comply with any of the provisions of section 3 or 4, they shall pay Franchisor, as liquidated damages and not as a penalty, a royalty equal to 15% of the gross amount of all income, sales, salary, wages, fees, dividends, distributions, and other compensation received or earned by Covenantor or any Covered Person, or to which any of those parties becomes entitled, as the result of the breach or noncompliance. The parties further agree that the royalty required by this paragraph is reasonable in light of the damages that Franchisor will incur. This payment is not exclusive of any other remedies that Franchisor may have, including equitable remedies, attorneys' fees, and costs.
-
- Definition of Competitive Business. "Competitive Business" means a business (i) that offers, provides or sells any of the Permitted Products or Services; or (ii) that offers, provides or sells any products or services similar to those offered as part of the Operating System; or (iii) in which Trade Secrets could be used to the disadvantage of Franchisor, Franchisee, or another Caring Transitions Franchise;
What This Means (2025 FDD)
According to Caring Transitions' 2025 Franchise Disclosure Document, if a franchisee (or related party) fails to comply with their confidentiality obligations, they must pay Caring Transitions liquidated damages, not as a penalty, a royalty equal to 15% of the gross amount of all income, sales, salary, wages, fees, dividends, distributions, and other compensation received or earned by the franchisee or any covered person, or to which any of those parties becomes entitled, as the result of the breach or noncompliance. This royalty payment is considered reasonable in light of the damages Caring Transitions will incur.
This payment is not the only recourse Caring Transitions has; they can also pursue other remedies, including equitable relief, attorneys' fees, and costs. This means that in addition to the 15% royalty on income, a franchisee could face lawsuits, injunctions, and be responsible for Caring Transitions' legal expenses.
The FDD defines a "Competitive Business" as one in which trade secrets could be used to the disadvantage of Caring Transitions, the franchisee, or another Caring Transitions franchise. This broad definition means that any business activity where confidential information could be leveraged against the franchise system could trigger these penalties. Prospective franchisees should carefully consider the scope of these restrictions and the potential financial implications of violating them.