Does the Craters & Freighters franchise agreement prevent a franchisee from being an officer of 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, the franchise agreement places restrictions on a franchisee's involvement with competitive businesses during the term of the agreement. Specifically, franchisees 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 as an officer, director, executive, or principal of any 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 Franchised Business.
This restriction means that as a Craters & Freighters franchisee, you cannot actively participate in or hold a significant position in a competing business during the term of your franchise agreement. This is a fairly standard clause in franchise agreements to protect the franchisor's business model and market share. The agreement does allow for a minor exception, permitting franchisees to own 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.
These in-term restrictive covenants are acknowledged by both the franchisee and their owners as material inducements for Craters & Freighters to enter into the agreement. This highlights the importance Craters & Freighters places on preventing franchisees from directly competing with the franchise system during the agreement's term. Prospective franchisees should carefully consider these restrictions and ensure they do not conflict with any existing business interests or future plans.