Does the Chem Dry franchise agreement restrict where a Competitive Business can be located or operating to be considered a conflict of interest?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
ANCHISEE acknowledges and agrees that CDI would be unable to protect the Confidential Information against unauthorized use or disclosure if franchisees of CHEM-DRY Businesses were permitted to hold interests or otherwise participate in or promote any Competitive Business (as defined below).
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- 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:
- a. have any direct or indirect controlling or non-controlling interest as an owner – whether of record, beneficially, or otherwise – in a Competitive Business – wherever located or operating (except that equity ownership of less than two percent (2%) of a Competitive Business whose shares or other forms of ownership interest are publicly traded on a recognized United States securities exchange will not be deemed to violate this subparagraph);
- b. perform services as a director, officer, manager, employee, consultant, contractor, representative, or agent for a Competitive Business, wherever located or operating;
- c.
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 places restrictions on franchisees, owners, managers, officers, partners, directors, and their respective spouses and adult offspring regarding involvement with Competitive Businesses.
Specifically, during the term of the agreement, these individuals are prohibited from having any direct or indirect interest in a Competitive Business, regardless of its location or operation. The only exception is if they have equity ownership of less than 2% in a Competitive Business whose shares are publicly traded on a recognized United States securities exchange. They are also restricted from performing services for a Competitive Business, irrespective of its location or operation.
The Chem Dry franchise agreement defines a "Competitive Business" as any business that provides or sells carpet or upholstery/drapery cleaning services or products, tile and stone care services or products, spot removal, applying anti-allergen and deodorizer, or protective services or products, Approved Services, or any related or ancillary services or products. This means that franchisees and related parties must avoid any significant financial or operational involvement in such businesses, regardless of where they are located, to avoid violating the franchise agreement.