Can Craters & Freighters purchase or merge with a business that competes with a franchisee's Craters & Freighters business?
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.
15.2.2 Divert, attempt to divert, or solicit business or customers of the Franchised Business, any Craters & Freighters Franchised Business, or any Craters & Freighters company-owned or Affiliate-owned business, to any Competitive Business by direct or indirect inducement or otherwise.
15.3 Post-Term Restrictive Covenants.
For a period of two (2) years after the expiration, transfer, or termination of this Agreement, Franchisee and its owner(s) may not, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any other person, partnership, or corporation:
15.3.1 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 Competitive Business at or within the following areas: (i) at the Premises of the Franchised Business; (ii) within the Territory granted to Franchisee under this Agreement; or (iii) within a radius of ten (10) miles of (a) the Premises of the Franchised Business, or (b) the premises of any other Craters & Freighters Franchised Business or any Craters & Freighters company-owned or Affiliate-owned outlet then-existing as of the date of the expiration, transfer, or termination of this Agreement.
15.3.2 Divert, attempt to divert, or solicit business or customers of the Franchised Business, any Craters & Freighters Franchised Business, or any Craters & Freighters company-owned or Affiliate-owned business, to any Competitive Business by direct or indirect inducement or otherwise.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
Based on the 2025 Craters & Freighters Franchise Disclosure Document, the franchise agreement includes non-compete clauses that address activities a franchisee can and cannot engage in during the term of the agreement and after its termination. During the term of the agreement, a franchisee cannot participate in a Competitive Business that offers similar services such as shipping, packaging, crating, receiving and delivery, storage, transportation, moving, logistics, blanket wrap, or freight forwarding services, without prior written consent from Craters & Freighters. However, a franchisee is allowed to own securities in a Competitive Business if those securities are listed on a stock exchange or traded over-the-counter, representing 5% or less of that class of securities.
After the agreement expires, is transferred, or is terminated, the franchisee is restricted from engaging in a Competitive Business within a specific area for two years. This area includes the franchisee's business premises, the territory granted to the franchisee, or within a 10-mile radius of the franchisee's premises or any other Craters & Freighters franchised or company-owned outlet. The franchisee is also prohibited from diverting or soliciting business or customers from any Craters & Freighters outlet to a Competitive Business.
The FDD excerpt does not explicitly state whether Craters & Freighters can purchase or merge with a business that competes with a franchisee's Craters & Freighters business. For clarification, a prospective franchisee should seek further information from the franchisor regarding Craters & Freighters’s rights to acquire or merge with competing businesses, and how that might affect the franchisee's territory or business.