Is a Caring Transitions franchisee allowed to divert any client of the Franchised Business to a Competitive Business?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
(5) divert or attempt to divert any business or client of the Franchised Business to a Competitive Business or, for the benefit of a Competitive Business, have any commercial dealings with or solicit the custom of anyone who was a client of or received services from the Franchised Business at any time during the one-year period prior to the beginning of the Restrictive Period; or
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- Covenants During Term of Franchise Agreement. Each Covenantor agrees that, so long as the Franchise Agreement is in effect, he or she shall not, either directly or indirectly, for him or herself or through, on behalf of, or in conjunction with, any other person (including a spouse, child, parent, or sibling of a Covenantor) (each of which is a "Covered Person" for purposes of this agreement):
- (a) divert or attempt to divert any business or client of the Franchised Business or of any other Caring Transitions Franchisee to a Competitive Business, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the Operating System;
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; or (iv) that offers, provides or sells products or services that are otherwise competitive with or may be considered an alternative to any products or services offered by Caring Transitions Franchises; or (v) that franchises or licenses others to do any of the foregoing.
Source: Item 23 — RECEIPT (FDD pages 49–202)
What This Means (2025 FDD)
According to Caring Transitions' 2025 Franchise Disclosure Document, a franchisee is restricted from diverting business or clients from the Franchised Business to a Competitive Business. During the term of the Franchise Agreement, a Covenantor (which includes the franchisee) agrees not to divert or attempt to divert any business or client of the Franchised Business or any other Caring Transitions franchisee to a Competitive Business, either directly or indirectly. They are also prohibited from performing any act that could be harmful to the goodwill associated with the Caring Transitions brand and operating system.
After the termination of the Franchise Agreement, the franchisee is still restricted from diverting business. For a period starting from the expiration or termination of the agreement and lasting for two years (the "Restrictive Period"), the franchisee cannot divert or attempt to divert any business or client of the Franchised Business to a Competitive Business. This also includes not having commercial dealings with or soliciting anyone who was a client of or received services from the Franchised Business within the one-year period before the start of the Restrictive Period, for the benefit of a Competitive Business.
A "Competitive Business" is defined broadly as any business that offers similar products or services to Caring Transitions, uses Trade Secrets to the disadvantage of Caring Transitions, or is otherwise competitive with Caring Transitions Franchises. This restriction is in place to protect Caring Transitions' business interests and the interests of its franchisees. The FDD states that these restrictions are considered reasonable and necessary to protect the business interests of Caring Transitions and its franchisees in the relevant markets.
However, there is an exception: such diversion may be allowed if authorized under another franchise agreement in effect between the franchisee (or Covenantor) and Caring Transitions. Additionally, Caring Transitions retains the right to reduce the scope of any covenant, including those related to non-competition, at its sole discretion with written notice to the Covenantor. This means that while the general rule prohibits diverting clients, there may be circumstances where it is permitted, subject to the franchisor's approval or changes to the non-compete terms.