During the term of the City Publications franchise agreement, can the franchisee have a direct ownership interest in a Competitive Business, and if so, are there any geographic limitations?
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, franchisees are restricted from owning an interest in a Competitive Business during the term of the agreement. Specifically, franchisees cannot own an interest in, manage, operate, be employed by, or act as a consultant to any Competitive Business. This restriction applies 'anywhere,' meaning there are no specific geographic limitations mentioned in this section.
The FDD defines a 'Competitive Business' as any 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 the franchisor or its other franchisees. However, there are exceptions to this restriction. The term 'Competitive Business' does not apply to any business operated by the franchisee under a Franchise Agreement with City Publications. It also does not apply to ownership for investment purposes of 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.
This restriction is significant for prospective franchisees as it limits their ability to engage in other business ventures, particularly those that might compete with City Publications. The definition of 'Competitive Business' is broad, including magazines, print ads, internet advertising, email advertising, QR codes, and search engine optimization services. Franchisees need to be aware of these limitations and seek written approval from City Publications if they wish to engage in any business activity that could be considered competitive. The franchisee is also restricted from hiring or attempting to hire any person employed by City Publications or any other City Publications franchisee.