Who is identified as a third-party beneficiary in the Restrictive Covenant Agreements required by Caring Transitions?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
7.20 Covenants of Employees and Agents. Franchisee shall require each of its management employees (except those individuals required to execute a Restrictive Covenant Agreement pursuant to section 15.9), at the time of the commencement of their association with Franchisee, to execute an "Employment Agreement" containing provisions:
- (a) requiring that all Confidential Information (as defined in section 10.1) that may be acquired by or imparted to the person in connection with their association with Franchisee (including the Manual, any proprietary software provided by Franchisor, and all information contained therein) be held in strict confidence and used solely for the benefit of Franchisee or Franchisor during their association with Franchisee and at all times thereafter;
- (b) prohibiting the person, during their association with Franchisee, from diverting or attempting to divert any business or customer of the Franchised Business or of any other Caring Transitions franchisee to any competitor of the franchised business, by direct or indirect inducement or otherwise;
- (c) prohibiting the person, during their association with Franchisee, from doing or performing, directly or indirectly, any act injurious or prejudicial to the goodwill associated with the Marks and the System; and
- (d) prohibiting the person, during their association with Franchisee and for a continuous period of one year (or the maximum period permitted or enforced by the laws of the state in which the Franchised Business is located, if such period is less than one year, but in no event less than six months) after the termination of their association with Franchisee, from operating, owning, maintaining, promoting, engaging in, or performing services for (as an employee or otherwise) any competitor of the franchised business.
Franchisee shall provide Franchisor with executed copies of all Employment Agreements required by this section. Franchisee may not grant any person enumerated above access to any confidential aspect of the System or the Franchised Business before their execution of an Employment Agreement. All Employment Agreements required by this section must be in a form satisfactory to Franchisor and must specifically identify Franchisor as a third-party beneficiary with the independent right to enforce the agreement. Franchisee's failure to obtain the execution of all Employment Agreements required by this section and provide copies thereof to Franchisor is a material breach of this agreement.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 41–49)
What This Means (2025 FDD)
According to Caring Transitions' 2025 Franchise Disclosure Document, Caring Transitions requires its franchisees to have their management employees (with some exceptions) sign an "Employment Agreement." This agreement contains restrictive covenants related to confidential information, business diversion, and actions that could harm the goodwill of the Caring Transitions brand.
The FDD specifies that these Employment Agreements must identify C.T. Franchising Systems, Inc. (Caring Transitions) as a third-party beneficiary. This designation gives Caring Transitions the independent right to enforce the agreement's terms, even though they are not a direct party to the agreement between the franchisee and their employee.
This requirement ensures that Caring Transitions has legal recourse if a franchisee's employee violates the terms of the Employment Agreement, such as by disclosing confidential information or competing with the franchise after their employment ends. It also emphasizes the importance Caring Transitions places on protecting its confidential information, brand reputation, and franchise system from potential harm caused by employees of its franchisees.