During the term of the Non-Compete Agreement, can a City Wide franchisee divert business 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 business or customers to a competitor. Specifically, the franchisee cannot directly or indirectly induce customers of the franchised business to move to a competitor. Additionally, franchisees are prohibited from performing any action that could be harmful to the goodwill associated with City Wide's marks and the system. However, this restriction is not absolute, as City Wide may provide written approval allowing a franchisee to engage in activities that would otherwise be prohibited by the non-compete agreement.
This non-compete obligation is in place because City Wide franchisees receive valuable training and confidential information, including client lists, pricing strategies, and business plans. The agreement aims to protect City Wide's proprietary information and market position. The agreement specifies that franchisees acknowledge the potential for immediate equitable remedies, such as restraining orders, to protect City Wide's confidential information, as monetary damages alone may not be sufficient to compensate for a breach of the non-compete terms.
It is important to note that City Wide retains the right to modify the scope of the non-compete agreement. The franchisor can reduce the scope of any covenant within the agreement without the franchisee's consent, and such modifications become effective immediately upon written notice to the franchisee. This provision grants City Wide flexibility in enforcing the non-compete agreement and allows them to tailor the restrictions based on specific circumstances.