Does the non-compete agreement apply after the term of the Cinch I.T. franchise agreement?
Cinch_I_T Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
If any or all portions of the covenants in this Section 11 are held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which Franchisor is a party, You expressly
Source: Item 23 — RECEIPTS (FDD pages 60–269)
What This Means (2024 FDD)
According to Cinch I.T.'s 2024 Franchise Disclosure Document, the non-compete agreement does apply after the expiration or termination of the franchise agreement. Specifically, for a period of two years after the agreement ends, the franchisee is restricted from engaging in any business that is the same as or substantially similar to a Cinch I.T. franchised business.
This restriction applies within a 25-mile radius of each Designated Territory described in the Development Area or within 25 miles of any Cinch I.T. business owned by the franchisor, another franchisee, or an affiliate that exists on the date of expiration or termination. This prevents a former franchisee from directly competing with existing Cinch I.T. businesses in close proximity.
However, there is an exception: the non-compete does not apply if the franchisee owns less than a 5% beneficial interest in the outstanding equity securities of any publicly-held corporation, provided they have no management or advisory responsibilities with that company. The FDD also states that if any part of the non-compete agreement is deemed unreasonable or unenforceable by a court, the franchisee agrees to be bound by a lesser covenant that imposes the maximum duty permitted by law.
This non-compete clause is fairly standard in franchising to protect the brand and other franchisees. Prospective Cinch I.T. franchisees should carefully consider the implications of this restriction, especially if they plan to remain in the same geographic area after the franchise agreement ends.