Does the Craters & Freighters franchise agreement prevent a franchisee from consulting for a Competitive Business during the term of the agreement?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
During the term of this Agreement, Franchisee and Franchisee's owner(s) may not, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any other person, partnership, or corporation:
- 15.2.1 Perform any services for, consult for, engage in, acquire, lend money to, extend credit to, have any interest in, or be employed as an officer, director, executive, or principal of any business that offers shipping, packaging, crating, receiving and delivery, storage, transportation, moving, logistics, blanket wrap, or freight forwarding services, or products or services similar to the Franchised Business ("Competitive Business") without the prior written consent of Franchisor.
Notwithstanding the foregoing, Franchisee will not be prohibited from owning securities in a Competitive Business if such securities are listed on a stock exchange or traded on the over-the-counter market and represent five percent (5%) or less of that class of securities.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, during the term of the agreement, a franchisee and their owners are restricted from engaging with a Competitive Business. Specifically, without prior written consent from Craters & Freighters, franchisees cannot perform services for, consult for, engage in, acquire, lend money to, extend credit to, have any interest in, or be employed as an officer, director, executive, or principal of any Competitive Business. A Competitive Business is defined as one that offers shipping, packaging, crating, receiving and delivery, storage, transportation, moving, logistics, blanket wrap, or freight forwarding services, or products or services similar to the Franchised Business.
However, there is an exception to this restriction. Franchisees are not prohibited from owning securities in a Competitive Business if such securities are listed on a stock exchange or traded on the over-the-counter market, provided that these securities represent five percent (5%) or less of that class of securities. This exception allows franchisees to make minor investments in publicly traded competitors without violating the franchise agreement.
These in-term restrictive covenants are considered material inducements for Craters & Freighters to enter into the agreement, emphasizing the importance of compliance. This means that Craters & Freighters places a high value on preventing franchisees from supporting or being involved with competing businesses during the term of the franchise agreement, as it could harm the Craters & Freighters brand and business model.