Does the Chem Dry franchise agreement prevent franchisees from engaging in activities that might injure the goodwill of the Chem Dry Marks and Franchise System?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
FRANCHISEE therefore agrees that during the term of this Agreement, neither FRANCHISEE, nor any Owner, manager, officer, partner or director of FRANCHISEE, if an Entity, and any of their respective spouses and adult offspring shall:
- d. engage in any other activity which might injure the goodwill of the Marks and Franchise System.
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:
-
- The Franchised Area as defined in this Agreement;
-
- 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
-
- 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, the franchise agreement includes provisions to protect the goodwill associated with the Chem Dry Marks and Franchise System. Specifically, franchisees are prohibited from engaging in activities that could harm this goodwill. This restriction applies not only to the franchisee but also to their owners, managers, officers, partners, directors, and their respective spouses and adult offspring.
This means that during the term of the agreement, franchisees and related parties must not participate in any activity that could negatively impact the reputation or value of the Chem Dry brand. This includes avoiding any actions that might divert customers or business opportunities away from the Chem Dry Business to a Competitive Business. The term "Competitive Business" is defined as any business that offers or franchises carpet and upholstery cleaning services, tile and stone care, spot removal, anti-allergen and deodorizer application, or protective services, or any related services or products.
Furthermore, upon termination or expiration of the franchise agreement, a covenant not to compete restricts franchisees and their owners from engaging in any Competitive Business within a specified geographic area for a period of two years. This includes the franchised area, any Chem-Dry Business franchised area, or a 10-mile radius from the franchised area. This restriction aims to prevent former franchisees from leveraging the knowledge and experience gained during their time with Chem Dry to compete unfairly and potentially damage the brand's reputation or customer base.
These measures are typical in franchising to ensure brand consistency and protect the franchisor's investment in its trademarks and business system. Prospective Chem Dry franchisees should carefully review these restrictions to understand the scope of prohibited activities and the implications for their business operations and future endeavors.