During the term of the agreement, can a City Publications franchisee own an interest in a Competitive Business without written approval from the Franchisor?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
agers and the spouses of each of the foregoing sign a like restrictive covenant which shall protect both Franchisor and Franchisee. Said covenants shall remain on file at the offices of Franchisee and are subject to audit or review as otherwise set forth herein.
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:
-
- 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;
-
Source: Item 23 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 Franchise Disclosure Document, a franchisee is restricted from owning an interest in a Competitive Business during the term of the agreement without written approval from City Publications. Specifically, the franchisee, their partners, officers, directors, members, executives, professional staff, sales staff, or their spouses cannot directly or indirectly own an interest in, manage, operate, be employed by, or act as a consultant to any Competitive Business without City Publications' written consent. This restriction applies to any Competitive Business, regardless of its location.
For a prospective City Publications franchisee, this means that during the term of their franchise agreement, they must obtain written approval from City Publications before engaging in any business activity that could be considered competitive. This includes not only direct ownership but also indirect involvement through family members or other entities. The definition of "Competitive Business" is broad, encompassing businesses that sell direct mail advertising or similar services, or businesses where City Publications' confidential information could be used to the disadvantage of City Publications or its franchisees. This definition extends to magazines, print ads, internet advertising, email advertising, QR codes, and search engine optimization services.
However, there are exceptions to this restriction. A City Publications franchisee can own less than five percent (5%) of the stock of any publicly-traded corporation in which similar services are sold only as an ancillary product, constituting less than ten percent (10%) of the aggregate gross sales of such business. Also, this restriction does not apply to any business operated by the franchisee under a Franchise Agreement with City Publications.
These restrictions are in place to protect City Publications' interests and the integrity of its franchise system. Failure to comply with these restrictions could result in legal action, including injunctions and other remedies, as outlined in the franchise agreement.