During the term of the Non-Compete Agreement, is a City Wide franchisee allowed to divert business or customers to a competitor?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
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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
Source: Item 22 — CONTRACTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, during the term of the Non-Compete Agreement, a franchisee is generally prohibited from diverting or attempting to divert business or customers to a competitor. Specifically, the franchisee cannot directly or indirectly induce customers away from the City Wide franchised business to a competitor. Additionally, franchisees are prohibited from performing any action that could be harmful or damaging to the goodwill associated with City Wide's trademarks and overall system.
This restriction is in place to protect City Wide's business interests and maintain the integrity of its brand. The non-compete agreement aims to prevent franchisees from using the knowledge, resources, and customer relationships gained through the City Wide franchise to benefit a competing business. This clause is a standard practice in franchising to safeguard the franchisor's investment in its brand and system.
However, there is an exception: if City Wide provides written approval, a franchisee may be allowed to engage in activities that would otherwise be considered a breach of the non-compete agreement. This implies that under certain circumstances, City Wide may grant permission for a franchisee to participate in activities that could potentially benefit a competitor. It is important to note that such approval must be obtained in writing to be valid.
A prospective City Wide franchisee should carefully consider the implications of this non-compete agreement and seek clarification from City Wide regarding the specific circumstances under which a waiver might be granted. Understanding the scope and limitations of the non-compete agreement is crucial for making an informed decision about investing in a City Wide franchise.