What specific business interests is Craters & Freighters seeking to protect with its restrictive covenants?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
interests and business relationships, including, but not limited to, Franchisor's relationship with approved suppliers, customers, and franchisees.
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.
- 15.3.3 Attempt to endorse, or enter into any business competing in whole or in part with Franchisor in granting franchisors or licenses, or establishing joint ventures, for Competitive Businesses.
- 15.4 Reasonableness of Restrictions.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, the restrictive covenants are designed to protect Craters & Freighters's business interests by preventing franchisees and their owners from engaging in activities that could harm the brand both during and after the franchise agreement term. During the term, franchisees are prohibited from involvement with any business offering similar services such as shipping, packaging, crating, receiving, delivery, storage, transportation, moving, logistics, blanket wrap, or freight forwarding without prior written consent from Craters & Freighters. However, franchisees can own up to 5% of the securities of a publicly traded Competitive Business. Franchisees are also restricted from diverting or soliciting business or customers of the Franchised Business to any Competitive Business.
Post-term, for two years after the agreement expires or terminates, franchisees and their owners are restricted from engaging in a Competitive Business within the physical location of the franchise, the territory granted to them, or within a 10-mile radius of the franchise or any other Craters & Freighters outlet. They are also prohibited from diverting or soliciting business or customers to a Competitive Business. These restrictions apply to the franchisee and their owners, ensuring that they cannot leverage their knowledge and experience gained as a Craters & Freighters franchisee to unfairly compete with the brand after leaving the system.
Craters & Freighters emphasizes that these covenants are material inducements for entering into the franchise agreement, highlighting their importance in protecting the franchisor's established market position, customer relationships, and proprietary business systems. The restrictions ensure that franchisees focus on growing their Craters & Freighters business and do not exploit the franchisor's resources and reputation for their own competitive advantage, either during or after the franchise term. This is a common practice in franchising to maintain brand integrity and prevent unfair competition.