Are Chem Dry franchisees allowed to solicit business from existing customers after the termination of the franchise agreement?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
D. COVENANT NOT TO COMPETE
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 the 2024 Chem Dry Franchise Disclosure Document, a franchisee is restricted from soliciting business from existing customers after the termination or expiration of the franchise agreement. Specifically, for a period of two years after the agreement ends, the franchisee cannot solicit business from customers of the Chem Dry business. This restriction also applies to contacting Chem Dry's suppliers or vendors for any competitive business purpose.
This non-solicitation clause is part of a broader covenant not to compete, which prevents the franchisee and their owners from participating in any Competitive Business within a defined geographic area. This area includes the original Franchised Area, any Chem-Dry business's Franchised Area, or a 10-mile radius from the boundary of the Franchised Area.
The FDD specifies that a "Competitive Business" includes any business that offers carpet or upholstery cleaning services, tile and stone care, spot removal, or related services. This broad definition means that franchisees need to be very careful about any business ventures they consider after leaving the Chem Dry system, to ensure they do not violate the non-compete agreement.
Chem Dry requires franchisees to provide access to the Customer List upon termination or expiration of the agreement. This list, which includes customer names, addresses, phone numbers, email addresses, and last service dates, cannot be used in connection with any business other than the Chem Dry business, nor can it be sold or transferred to a third party, reinforcing the restrictions on post-termination activities.