What is the threshold of beneficial ownership in a publicly traded company that is exempt from the restrictions in the Caring Transitions agreement?

According to Caring Transitions's 2025 Franchise Disclosure Document, the non-compete restrictions do not apply if a Covenantor has beneficial ownership of less than 1% of the outstanding equity securities in a company registered under the Securities and Exchange Act of 1934. This means that a franchisee or related party can own a small amount of stock in a publicly traded competitor without violating the franchise agreement's restrictions.

This exception is fairly standard in franchise agreements, as it allows franchisees to invest in the stock market without fear of violating the non-compete clause, provided their ownership stake is minimal. The 1% threshold is a common benchmark used to distinguish between passive investment and active involvement in a competing business.

For a prospective Caring Transitions franchisee, this clause offers some flexibility in personal investment strategies. However, it's crucial to remain below the 1% threshold to avoid any potential conflict with the non-compete obligations outlined in the franchise agreement. If a franchisee wishes to exceed this ownership level, they should seek legal counsel to assess the potential risks and implications.