Does the City Publications franchise agreement prohibit the franchisee from being a consultant for an entity that grants franchises to operate a Competitive Business?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee specifically acknowledges and agrees that Franchisor would be unable to protect the Confidential Information against unauthorized use or disclosure and would be unable to encourage a free exchange of ideas and information among CITY PUBLICATIONS franchisees if owners of Franchised Businesses and members of their immediate families or households were permitted to hold interest in or perform services for any Competitive Business. Franchisee, therefore, agrees that during the term of this Agreement, neither Franchisee nor any holder of a legal or beneficial interest in Franchisee nor any member of their immediate families or households will: (a) have any direct or indirect ownership interest in any Competitive Business located or operating anywhere in the world; or (b) perform services as a director, officer, manager, management or sales employee, consultant, representative, agent or otherwise for any Competitive Business or any entity which is granting franchises or licenses to others to operate a Competitive Business located or operating anywhere in the world.
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 Franchise Disclosure Document, the franchise agreement addresses the franchisee's involvement with competitive businesses both during and after the term of the agreement. During the term, the franchisee is prohibited from acting as a consultant to any Competitive Business or any entity that grants franchises or licenses to others to operate a Competitive Business anywhere in the world. 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.
This restriction extends not only to the franchisee but also to any holder of a legal or beneficial interest in the franchise and members of their immediate families or households. The agreement specifies that neither the franchisee nor these related parties can perform services as a director, officer, manager, management or sales employee, consultant, representative, or agent for any Competitive Business or any entity granting franchises for such businesses.
After the termination of the franchise agreement, there are also restrictions, although they are different in scope. For a period of two years after the agreement ends, the franchisee is restricted from certain activities related to Competitive Businesses. However, the restriction on acting as a consultant specifically for entities that grant franchises to operate a Competitive Business is not mentioned in the section detailing restrictions after termination.
Prospective franchisees should carefully consider these restrictions, as they significantly limit their ability to engage with competing businesses during the term of the agreement and impose limitations for a period after termination. It is advisable to seek legal counsel to fully understand the implications of these non-compete clauses, especially in relation to state-specific laws that may affect their enforceability.