Does a Chem Dry franchisee acquire any ownership interest in the Confidential Information?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
CDI possesses (and will continue to develop and acquire) certain confidential information relating to, without limitation, the methods, techniques, formats, specifications, procedures, information, systems, sales and marketing techniques and knowledge of and experience in the development, operation and franchising of CHEM-DRY Businesses (the "Confidential Information"). CDI will disclose the Confidential Information to FRANCHISEE in the training program, the Manual and/or in guidance furnished to FRANCHISEE. FRANCHISEE acknowledges that the Confidential Information is proprietary and/or involves trade secrets of CDI and that FRANCHISEE will not acquire any interest in the Confidential Information, other than the right to utilize it as CDI specifies in the operation of the BUSINESS during the term of this Agreement. FRANCHISEE acknowledges and agrees that the Confidential Information is disclosed to FRANCHISEE only on the condition that FRANCHISEE agrees, and FRANCHISEE in fact does agree, that FRANCHISEE:
a. will not use or disclose Confidential Information in or to any other business or in any capacity;
b. will keep each item deemed to be part of Confidential Information absolutely confidential, both during and after this Agreement's Term;
c. will not make unauthorized copies of any Confidential Information disclosed via electronic medium or in written or other tangible form; and
d. will require each employee of the BUSINESS, at the time of employment, to sign a confidentiality agreement agreeing to maintain the confidentiality of the Confidential Information.
CDI has the right to regulate the form of agreements that FRANCHISEE uses.
FRANCHISEE agrees that the list of FRANCHISEE's current customers, former customers and those who have inquired about the services provided by the BUSINESS (the "Customer List") shall be included in the Confidential Information, shall be the property of CDI and shall constitute a trade secret of CDI.
FRANCHISEE agrees that it does not own the Customer List and that it will not disclose the Customer List, or any portion thereof, to any person or entity other than CDI or its designee, either during the term of this Agreement or thereafter.
FRANCHISEE agrees to only use the Customer List in the operation of the BUSINESS and in accordance with this Agreement.
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, franchisees do not acquire any ownership interest in the Confidential Information. Chem Dry retains ownership of all Confidential Information, which includes methods, techniques, formats, specifications, procedures, information, systems, sales and marketing techniques, and knowledge related to the Chem Dry business. Franchisees are only granted the right to utilize this information as specified by Chem Dry during the term of the Franchise Agreement.
This means that a Chem Dry franchisee's use of the Confidential Information is limited to operating their franchise according to Chem Dry's guidelines. Franchisees cannot use or disclose the Confidential Information in any other business or capacity, and they must keep it confidential both during and after the agreement term. This restriction extends to preventing unauthorized copies of the Confidential Information and requiring employees to sign confidentiality agreements.
Furthermore, the customer list, which includes current, former, and prospective customers, is considered part of the Confidential Information and remains the property of Chem Dry. Franchisees do not own the customer list and cannot disclose it to any third party, except as designated by Chem Dry. The franchisee can only use the customer list to operate their Chem Dry business in accordance with the Franchise Agreement.
Upon termination or expiration of the Franchise Agreement, the franchisee must immediately cease using any of Chem Dry's Confidential Information and return all confidential materials, including the operations manual and proprietary equipment. This ensures that Chem Dry maintains control over its proprietary information and protects its competitive advantage. These stipulations are typical in franchise agreements to protect the franchisor's intellectual property and trade secrets.