Does the Craters & Freighters in-term restrictive covenant prevent a franchisee from being employed as an officer of a Competitive Business?
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 Craters & Freighters's 2025 Franchise Disclosure Document, during the term of the Franchise Agreement, franchisees and their owners are restricted from being employed as an officer of a Competitive Business. A Competitive Business is defined as 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.
However, this restriction is not absolute. A Craters & Freighters franchisee is allowed to own securities in a Competitive Business if the securities are listed on a stock exchange or traded on the over-the-counter market, and if they represent five percent (5%) or less of that class of securities.
This in-term restrictive covenant is a material inducement for Craters & Freighters to enter into the Franchise Agreement, highlighting the importance of compliance for franchisees and their owners. To engage in any of the restricted activities, a franchisee must obtain prior written consent from Craters & Freighters.