When establishing a Controlled Entity for a City Publications franchise, what restriction is placed on the entity's activities?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
A. Restriction During Term of Agreement
Franchisee covenants that, except as otherwise approved in writing by Franchisor, neither Franchisee nor any partner(s), officer(s), director(s), member(s), executives, professional staff or sales staff or the spouses of any of the foregoing shall, during the term hereof, either directly or indirectly, for itself or through, on behalf of or in conjunction with, any person, persons, partnership, corporation, limited liability company or other entity:
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- Own an interest in, manage, operate, be employed, in a sales or management capacity, by, or act as a consultant to any Competitive Business anywhere;
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- Initiate any action to hire, or attempt to hire for any other employer, any person who is employed by Franchisor or employed by any other franchisee of the CITY PUBLICATIONS System, or induce any such person to leave his employment with Franchisor or any other franchisee in order to work for any other employer, whether or not the person's employment with the business is pursuant to a written agreement or is at will; or
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- Divert business of customers of the Franchised Business or other Franchisor or franchisee-owned CITY PUBLICATIONS Businesses to any Competitive Business.
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
Based on the 2025 City Publications Franchise Disclosure Document, a franchisee faces restrictions during the term of the agreement regarding business activities, whether acting directly or indirectly, for themselves or with another entity. Specifically, the franchisee is restricted from owning an interest in, managing, operating, being employed by, or acting as a consultant to any Competitive Business. This restriction applies anywhere. A "Competitive Business" is defined as one 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 City Publications or its other franchisees.
Additionally, a City Publications franchisee is prohibited from initiating any action to hire or attempting to hire any person employed by City Publications or any other City Publications franchisee. They also cannot induce any such person to leave their employment with City Publications or another franchisee to work for another employer, regardless of whether the employment is based on a written agreement or is at will.
Finally, the franchisee cannot divert business from customers of the franchised City Publications business or other City Publications or franchisee-owned City Publications businesses to any Competitive Business. These restrictions are in place to protect City Publications' market position, confidential information, and employee base during the term of the franchise agreement.