Does the definition of 'Competitive Business' for City Publications include internet advertising?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
"Competitive Business" means any business that sells, or grants franchises or licenses to others to operate a business that sells, direct mail advertising or similar services to those offered as part of the CITY PUBLICATIONS System or in which Confidential Information could be used to the disadvantage of Franchisor or its other franchisees; provided, however, that the term "Competitive Business" shall not apply to: (a) any business operated by Franchisee under a Franchise Agreement with Franchisor, or (b) ownership for investment purposes of less than five percent (5%) of the stock of any publicly-traded corporation in which similar services as those offered as part of the System are sold only as an ancillary product, constituting less than ten percent (10%) of the aggregate gross sales of such business. Without limiting the foregoing, "Competitive Business" includes, among other things, magazines and any other print ads, internet advertising, email advertising, QR codes, and search engine optimization services;
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 Franchise Disclosure Document, the definition of 'Competitive Business' explicitly includes internet advertising. The FDD defines a 'Competitive Business' as any entity that sells direct mail advertising or similar services to those offered by City Publications, or any business where Confidential Information could be used against City Publications. This definition extends to various forms of advertising, including magazines, print ads, internet advertising, email advertising, QR codes, and search engine optimization services.
This broad definition has significant implications for prospective franchisees. It restricts franchisees from engaging in or owning businesses that offer similar advertising services, even after the franchise agreement ends. The restriction applies not only to direct competitors in direct mail advertising but also to businesses involved in internet and digital advertising, which are increasingly important in the modern advertising landscape.
The FDD does provide limited exceptions. Franchisees can own less than 5% of a publicly-traded corporation that offers similar services as an ancillary product, constituting less than 10% of the corporation's gross sales. However, this exception is narrow and primarily aimed at passive investments rather than active involvement in a competing business. Franchisees need to be aware of these restrictions and carefully consider their business activities, both during and after the franchise term, to avoid violating the agreement.
Given the breadth of the 'Competitive Business' definition, prospective franchisees should seek clarification from City Publications regarding specific activities that might be considered competitive. Understanding these limitations is crucial for making an informed decision about investing in a City Publications franchise and planning for future business ventures.