Are Casiola franchisee owners subject to the same in-term non-competition obligations as the franchisee?
Casiola Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee agrees that during the Term of this Agreement, Franchisee shall not engage in the following activities (the "Prohibited Activities"): (a) owning and/or having any legal or equitable interest whether, as an individual proprietor, owner, partner, member or shareholder of a Corporate Entity, or, in any similar capacity, in a Competitive Business other than, owning an interest of 3% or less in a publicly traded company that is a Competitive Business; (b) operating, managing, funding and/or performing services whether, as an employee, officer, director, manager, consultant, representative, agent, and/or creditor or, in any similar capacity, for or benefitting a Competitive Business; (c) diverting or attempting to divert any business or customers from Franchisor or, one of Franchisor's affiliates or franchisees; (d) inducing any customer or client of Franchisor, Franchisor's affiliates, franchisees of the System, or, of Franchisee, to any other person or business that is not a Casiola Business; and/or (e) engaging in any actions, inactions, and/or activities in violation of Articles 6.B. and/or 6.C. of this Agreement (all, individually and collectively, referred to as the "Prohibited Activities"). Franchisee agrees that if Franchisee were to engage in the Prohibited Activities that such actions would be unfair, would constitute unfair competition and would cause harm to Franchisor, the System and other Casiola Business franchisees. Franchisee agrees that the foregoing covenants and obligations shall also apply to Franchisee's Owners and that Franchisee's Owners shall each execute and deliver to Franchisor the Franchise Owner Agreement and Guaranty in the form attached to this Agreement as Exhibit 1.
Source: Item 23 — RECEIPTS (FDD pages 47–209)
What This Means (2024 FDD)
According to Casiola's 2024 Franchise Disclosure Document, franchisee owners are subject to in-term non-competition obligations. During the term of the Franchise Agreement, the franchisee is restricted from engaging in activities such as owning, operating, or having any financial interest in a competitive business. This includes acting as an employee, officer, director, manager, consultant, or agent for a competitive business. The franchisee is also prohibited from diverting business or customers from Casiola or its affiliates and franchisees. These restrictions also apply to the franchisee's owners.
To ensure compliance, Casiola requires that each of the franchisee's owners execute and deliver a Franchise Owner Agreement and Guaranty. This agreement legally binds the owners to the same non-competition obligations as the franchisee. This measure is in place to protect Casiola's interests and prevent unfair competition that could harm the brand, the system, and other Casiola franchisees.
The FDD specifies that engaging in prohibited activities would be considered unfair competition and would cause harm to Casiola, the System, and other Casiola Business franchisees. This underscores the importance Casiola places on these restrictions and the potential legal ramifications for non-compliance. By requiring owners to sign a separate agreement, Casiola ensures that these obligations are clearly understood and legally enforceable against all parties with a significant interest in the franchise.