Following termination or expiration of the Cinch I.T. franchise agreement, what business activities are prohibited within a 25-mile radius of the former franchise?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
ndirect interest in any business that (i) specializes, in whole or in part, in offering to the public substantially similar products and/or services to those products and/or services offered by a CINCH I.T. franchised business prior to the termination or expiration of this Agreement (a "Competitive Business") or (ii) grants franchises or licenses to others to operate a Competitive Business.
- 11.2 You covenant that, except as otherwise approved in writing by Us, You shall not, for a continuous uninterrupted period commencing upon the expiration or termination of this Agreement, regardless of the cause for termination, and continuing for two (2) years thereafter, either directly or indirectly, for Yourself or through, on behalf of or in conjunction with any person, persons, partnership or corporation, own, maintain, engage in, be employed by, advise, assist, invest in, franchise, make loans to, or have any interest in any business which is the same as or substantially similar to a CINCH I.T. franchised business and which is located within a radius of twenty-five (25) miles of each Designated Territory described in the Development Area hereunder or within twenty-five (25) miles of the location of any Franchisor-owned, franchisee-owned or affiliate-owned CINCH I.T. Business under the System which is in existence on the date of expiration or termination of this Agreement.
- 11.3 Sections 11.1 and 11.2 shall not apply to ownership by You of less than a five percent (5%) beneficial interest in the outstanding equity securities of any publicly-held corporation provided that You have no management responsibility or advisory responsibility with such publicly-traded company.
- 11.4 The Parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 60–269)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, for two years after the franchise agreement expires or terminates, a franchisee is restricted from engaging in certain business activities within a 25-mile radius of their former Cinch I.T. location or any other Cinch I.T. business.
Specifically, the franchisee cannot own, manage, maintain, operate, or advise any business that offers products or services substantially similar to those offered by the Cinch I.T. franchise. This includes being employed by or investing in such a business. The franchisee is also prohibited from granting franchises or licenses to others to operate a similar competitive business.
This non-compete clause prevents a former Cinch I.T. franchisee from directly leveraging the knowledge and experience gained from the franchise to start a competing business nearby, which could take away customers from existing Cinch I.T. locations. However, the franchisee can own less than 5% of a publicly-held corporation's equity securities as long as they do not have management or advisory responsibilities with that company.