Does the Craters & Freighters franchise agreement prevent a franchisee from having any interest in a Competitive Business during the term of the agreement?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee and Franchisee's owner(s) further acknowledge that these covenants and agreements relating to non-competition and non-solicitation are material inducements for Franchisor to enter into this Agreement, and that it is essential that Franchisee and Franchisee's owner(s) comply with the terms set forth herein.
- 15.2 In-Term Restrictive Covenants.
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, the franchise agreement includes in-term restrictive covenants that limit a franchisee's involvement with any Competitive Business. During the term of the agreement, a Craters & Freighters franchisee and their owners are prohibited from performing services for, consulting for, engaging in, acquiring, lending money to, extending credit to, having any interest in, or being employed by a Competitive Business without prior written consent from Craters & Freighters. 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 Craters & Freighters franchised business.
However, there is an exception to this restriction. A Craters & Freighters franchisee is not prohibited from owning securities in a Competitive Business if those securities are listed on a stock exchange or traded on the over-the-counter market, provided that the securities represent five percent (5%) or less of that class of securities. This exception allows franchisees to make minor investments in publicly traded companies that may be considered competitors without violating the franchise agreement.
These restrictions are material inducements for Craters & Freighters to enter into the franchise agreement, emphasizing the importance of compliance. These covenants aim to protect Craters & Freighters' market position and prevent franchisees from using the franchisor's resources and knowledge to benefit competing businesses during the term of the agreement.