For what actions is the Closet Storage Concepts franchisee liable after the transfer of interest?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
For a period of 2 years after the expiration, nonrenewal, transfer or termination of this Agreement,
regardless of the cause, neither Franchisee, nor its equity owners shall, directly or indirectly, for itself or through, on behalf of, or in conjunction with any other person, partnership or corporation solicit business from customers of Franchisee's former Franchised Business for any competitive business purpose nor solicit any employee of Franchisor or any other Closet & Storage Concepts or More Space Place System franchisee to discontinue his or her employment.
For a period of 2 years after the expiration and nonrenewal, transfer or termination of this Agreement, regardless of the cause, neither Franchisee, nor its equity owners shall, directly or indirectly, for itself or through, on behalf of, or in conjunction with any other person, partnership or corporation own, maintain, engage in, be employed by, or have any interest in any company which grants franchises or licenses for any business competing in whole or in part with Franchisor.
- 6.4.3 Intent and Enforcement.
It is the intent of the parties that the provisions of this Section 6.4 shall, to the fullest extent permissible under applicable law, be judicially enforced; accordingly, any reduction in scope or modification of any part of the noncompetition provisions contained in this Agreement shall not render any other part unenforceable.
In the event of the actual or threatened breach of this Section 6.4 by Franchisee, or any of its equity owners, Franchisor shall be entitled to an injunction restraining such person from any such actual or threatened breach.
In the event of the actual or threatened breach of this Section 6.4, Franchisor's harm shall be irreparable and Franchisor shall have no adequate remedy at law to prevent the harm.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, after transferring a franchise, the franchisee remains liable for certain post-termination obligations. Specifically, for two years after the transfer, the franchisee (or its equity owners) cannot solicit business from customers of the former Closet Storage Concepts franchise for any competitive purpose. They are also prohibited from soliciting any employee of Closet Storage Concepts or any other Closet Storage Concepts or More Space Place System franchisee to discontinue their employment.
Additionally, for a period of two years post-transfer, the franchisee (or its equity owners) cannot own, maintain, engage in, be employed by, or have any interest in any company that grants franchises or licenses for any business competing with Closet Storage Concepts. These restrictions apply regardless of the cause of the transfer.
Closet Storage Concepts includes these non-compete and non-solicitation clauses to protect its brand, customer relationships, and franchisee network. These provisions are fairly standard in franchising to ensure that a former franchisee does not leverage their knowledge and relationships gained during the franchise agreement to unfairly compete with the system after they leave. The FDD states that Closet Storage Concepts can seek a court order to stop a franchisee from violating these terms and that harm to Closet Storage Concepts would be irreparable, entitling them to an injunction.