Does the Craters & Freighters franchise agreement prevent a franchisee from being a principal 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 does address whether a franchisee can be a principal in a competitive business during the term of the agreement. During the term of the agreement, the franchisee and the franchisee's owners 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 business that offers similar services to Craters & Freighters without prior written consent from the franchisor. These services include shipping, packaging, crating, receiving and delivery, storage, transportation, moving, logistics, blanket wrap, or freight forwarding services. This restriction is referred to as a "Competitive Business."
However, there is an exception to this restriction. A Craters & Freighters franchisee is 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 the securities represent five percent (5%) or less of that class of securities.
These in-term restrictive covenants are material inducements for Craters & Freighters to enter into the agreement, emphasizing the importance of compliance for both the franchisee and their owners. This non-compete clause is typical in franchising to protect the brand and system that Craters & Freighters has developed.