Besides the defined franchised area, what other geographic areas are considered when determining restrictions related to a Chem-Dry franchise agreement?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
Upon termination or expiration of this Agreement, FRANCHISEE and its Owner(s) agree that for a period of two (2) years, commencing on the effective date of termination or expiration, or the date on which FRANCHISEE actually ceases to conduct the business described in this Agreement, whichever is later, neither FRANCHISEE nor its owner(s) will (a) participate in or have any direct or indirect interest (e.g., through a spouse) as a disclosed or beneficial owner, investor, lender, partner, director, officer, manager, consultant, employee, representative or agent, or in any other capacity, in any Competitive Business, (b) solicit business from customers of the BUSINESS or contact any of our suppliers or vendors for any Competitive Business purpose, or (c) divert or attempt to divert any business or customer from the BUSINESS to any 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 or the System, within:
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- The Franchised Area as defined in this Agreement;
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- The geographic area encompassed by the Franchised Area(s) of any Chem-Dry Business as of the date of the termination or expiration of this Agreement; or
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- A geographic area that is contained in a circle having a radius of 10 miles outward from the outside boundary of the Franchised Area as defined in this Agreement.
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem-Dry's 2024 Franchise Disclosure Document, in addition to the franchisee's defined territory, two other geographic areas are considered when determining restrictions related to the franchise agreement: the franchised areas of any other Chem-Dry businesses and the area within a 10-mile radius from the boundary of the franchisee's territory. These restrictions apply specifically to the covenant not to compete, which takes effect upon termination or expiration of the franchise agreement.
Specifically, the franchisee and their owners are restricted from participating in any competitive business, soliciting business from Chem-Dry customers, or diverting business away from Chem-Dry within these defined areas. This includes any direct or indirect interest in a competitive business, such as being an owner, investor, lender, partner, director, officer, manager, consultant, employee, representative, or agent. The restrictions are in place for a period of two years after the termination or expiration of the franchise agreement.
This non-compete agreement is designed to protect Chem-Dry's market share and goodwill by preventing former franchisees from leveraging their knowledge and relationships gained during their time with Chem-Dry to compete against the franchise system. The 10-mile radius extends the protection beyond the immediate territory, acknowledging that customers may come from outside the franchisee's specific area. Franchisees should carefully consider these restrictions, as violating them could result in legal action by Chem-Dry.