Does the Chem Dry non-compete agreement apply after a transfer of the franchise?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
FRANCHISEE and its transferring Owners (and any spouses or other immediate family members) acknowledge in a writing delivered to CDI that each of them will not, for two (2) years beginning on the transfer's effective date, engage in any of the activities proscribed in Section 16.D. below;
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to the 2024 Chem Dry Franchise Disclosure Document, if you transfer your Chem Dry franchise, you and your transferring owners (along with spouses or immediate family members) must acknowledge in writing that you will not engage in activities prohibited in Section 16.D for two years after the transfer's effective date. This means the non-compete agreement does apply after a transfer of the franchise.
This requirement ensures that the seller of the franchise does not immediately start a competing business that could take away customers or undermine the value of the franchise for the new owner. The specific activities restricted under Section 16.D are not detailed in the provided excerpts, but typically, non-compete agreements in franchising restrict the seller from operating a similar business within a certain geographic area.
Prospective Chem Dry franchisees should carefully review Section 16.D of the Franchise Agreement to fully understand the scope and limitations of the non-compete obligations. It is also important to note that the purchase agreement between the franchisee and the transferee must include a dollar breakdown of the sale price allocated to the covenant not to compete. This allocation can have tax implications for both the seller and the buyer. Chem Dry also requires that they approve the material terms of the transfer.