To whose benefit does the Closet Storage Concepts agreement inure?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
5.7 Trade Secrets and Confidential Information. The System is unique and Franchisee may receive confidential information which may include, without limitation: (i) design specifications; (ii) methods, formats, specifications, standards, systems, procedures, sales and marketing techniques; (iii) knowledge of specifications for and suppliers of, and methods of ordering, certain products, materials, equipment and supplies; (iv) knowledge of the operating results and financial performance of other Closet & Storage Concepts businesses; (v) the Operations Manual; (vi) training materials and programs; (vii) customer data; (viii) all password-protected portions of Franchisor's website, intranets and extranets and the information they contain (including the email addresses of franchisees); and (ix) specifics regarding the inner workings of computer software, applications or other technology used by the System ("Confidential Information"). Franchisee shall use the Confidential Information only for the purposes and in the manner authorized in writing by Franchisor, and its use shall inure to the benefit of Franchisor. Franchisee shall inform all employees before communicating or divulging any Confidential Information to them of their obligation of confidence. Franchisee shall be liable to Franchisor for the actions of any such individuals with respect to the Confidential Information. In addition, subject to applicable law, Franchisee shall obtain a written agreement in the form attached as Exhibit "3(a)" from Franchisee's employees and any other person having access to the Operations Manual or to whom Franchisee wishes to disclose any Confidential Information that they shall maintain the confidentiality of the Confidential Information and they shall recognize Franchisor as a third-party beneficiary with the independent right to enforce the covenants either directly in Franchisor's own name as beneficiary or acting as agent. Spouses of Franchisees must sign the Confidentiality, Non-Disclosure and Non-Competition Agreement in the form attached as Exhibit "3(b)". All executed agreements must be forwarded to Franchisor. Franchisee hereby appoints Franchisor as its agent with respect to the enforcement of these covenants. Franchisee shall retain all written Confidentiality Agreements with Franchisee's business records for the time period specified in the Operations Manual. Franchisee shall enforce all covenants and shall give Franchisor notice of any breach or suspected breach
of which Franchisee has knowledge.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, the franchise agreement is structured to primarily benefit the franchisor. Specifically, any use of the confidential information provided to the franchisee must inure to the benefit of Closet Storage Concepts. This means that while franchisees are granted access to the Closet & Storage Concepts System, including proprietary information, operational methods, and trade secrets, the ultimate advantage derived from the use of this information must accrue to the franchisor.
This condition ensures that the Closet Storage Concepts system maintains its integrity and uniformity across all franchise locations. By mandating that the benefits of using confidential information inure to the franchisor, Closet Storage Concepts retains control over its brand standards, operational procedures, and overall business model. This arrangement is typical in franchising, where the franchisor licenses its brand and system but retains ownership and control over its core elements.
For a prospective Closet Storage Concepts franchisee, this stipulation highlights the importance of adhering strictly to the franchisor's guidelines and operational manual. While franchisees can leverage the established Closet & Storage Concepts system to operate their business, they must recognize that the system's improvements and advantages ultimately benefit the franchisor. This underscores the franchisee's role in maintaining brand consistency and contributing to the overall success of the Closet Storage Concepts network, which in turn strengthens the franchisor's position.
Furthermore, this clause emphasizes that the franchisee's use of confidential information is limited to the scope defined by Closet Storage Concepts. Any unauthorized use or dissemination of this information could be a breach of the franchise agreement, potentially leading to legal repercussions. Therefore, franchisees must ensure that they and their employees understand and comply with the confidentiality requirements outlined in the agreement and related documents.