Does the City Wide non-compete agreement restrict the franchisee from having any interest in a competitive business?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
s of a beneficial interest, at any time during the term of this Non-Compete Agreement, of the securities of Franchisee, and of any corporation directly or indirectly controlling Franchisee, if Franchisee is a corporation; and the general partners and any limited partner owning any percentage of Franchisee if a partnership.
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- For the purposes of this agreement, the term "Franchised Business" (as defined in the Franchise Agreement) will be further modified to mean use of CITY WIDE's System and Marks at the following location ("Location"):
The franchise Territory consists solely of the following:
ATTACHMENT B TO THE FRANCHISE AGREEMENT - DESIGNATED TERRITORY
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- Franchisee covenants that during the term of this Non-Compete Agreement, except as otherwise approved in writing by CITY WIDE, Franchisee will not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, partnership, or corporation:
- a. Divert or attempt to divert any business or customers of the Franchised Business to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any act injurious or prejudicial to the goodwill associated with CITY WIDE's Marks and the System; or
- b. Own, maintain, engage in, consult with, or have any material interest in any competitive business (including any business operated by Franchisee prior to entry into the Franchise Agreement) specializing, in whole or in part, in providing the same or similar services or products or activities of any type or nature, targeted at a retail market of a
type the same as or similar to the type of programs offered or provided or markets targeted in or by the System.
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- Franchisee specifically acknowledges that, pursuant to this Agreement, Franchisee will receive valuable training and confidential information, including, without limitation, CITY WIDE's past, present or prospective client list, pricing formulas, policies, bids, quotes, proposals, profitability, margin strategies, presentation strategies and techniques, business plans, training materials, and additional information regarding the promotional, operational, sales and marketing methods and techniques of CITY WIDE and the System. Accordingly, Franchisee covenants that, except as otherwise approved in writing by CITY WIDE, Franchisee will not, for a period of two (2) years after the expiration or termination of this Agreement, regardless of the cause of termination, either directly or indirectly, for himself, or through, on behalf of, or in conjunction with any person, persons, partnership, or corporation, own, maintain, engage in, consult with or have any interest in any business specializing, in whole or in part, in providing the same or similar services or products or activities of any type or nature, targeted at a market of a type the same as or similar to the type of programs offered or provided or markets targeted in or by the System:
- a. Within a radius of 150 miles of Franchisee's Franchised Business Location.
- b. Within the metropolitan statistical area where Franchisee's Franchised Business is located; or
- c. Within a radius of 150 miles of the Location of any other business using the System, whether franchised or owned by CITY WIDE.
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- Each of the foregoing covenants will be construed as independent of any other covenant or provision of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to the 2025 City Wide Franchise Disclosure Document, the Non-Compete Agreement restricts a franchisee from having a material interest in a competitive business during the term of the agreement. Specifically, the franchisee cannot own, maintain, engage in, consult with, or have any material interest in any competitive business specializing in similar services or products targeted at a similar retail market as the City Wide system. This restriction applies unless City Wide provides written approval otherwise.
This means that during the franchise term, a City Wide franchisee is generally prohibited from being involved with any competing commercial cleaning business. This includes businesses the franchisee may have owned prior to signing the Franchise Agreement. The restriction is designed to protect City Wide's market and business model by preventing franchisees from directly competing with the system while benefiting from its resources and brand recognition.
However, there is an exception to this restriction. The franchisee is allowed to own less than a five percent (5%) beneficial interest in the outstanding equity securities of any corporation which is registered under the Securities Exchange Act of 1934. This allows franchisees to invest in publicly traded companies that may have some competitive overlap with City Wide, provided their ownership stake remains below the 5% threshold.
After the franchise agreement expires or terminates, the franchisee is restricted for two years from owning, maintaining, engaging in, consulting with, or having any interest in any business specializing in similar services or products or activities targeted at a market similar to the City Wide system. This post-term restriction applies within a 150-mile radius of the franchisee's former location, within the metropolitan statistical area where the business was located, or within a 150-mile radius of any other business using the City Wide system. City Wide also has the right to reduce the scope of any covenant set forth in the Non-Compete Agreement without the franchisee's consent.