What is the exception to the cessation of operation rule for Crawlspace Medic franchisees?
Crawlspace_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
) in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Crawlspace Medic franchisees or Franchisor-affiliated outlets.
- 19.5.2. Upon the expiration or earlier termination of this Agreement or upon a Transfer and continuing for twenty-four (24) months thereafter, Franchisee and Principals, if any, shall not, either directly or indirectly, for themselves or through, on behalf of or in conjunction with any person or entity (i) divert, or attempt to divert, any business or customer of the Franchised Business or of other franchisees in the System to any competitor, by direct or indirect inducement or otherwise; or (ii) participate as an owner, partner, director, officer, employee, consultant or agent or serve in any other capacity in any crawlspace or basement service business within twenty-five (25) miles of the Territory or any Crawlspace Medic location; or (iii) seek to employ any person who is at that time employed by Franchisor or otherwise induce such person to leave his or her employment or (iv) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System or (v) in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Crawlspace Medic franchisees.
- 19.6. Reasonableness of Restrictions. Franchisee and each Principal, if any, acknowledges and agrees that the covenants not to compete set forth in this Agreement are fair and reasonable and will not impose any undue hardship on Franchisee or Principals, if any, since Franchisee or Principals, as the case may be, have other considerable skills, experience and education which afford Franchisee or Principals, as the case may be, the opportunity to derive income from other endeavors.
- 19.7. Reduction of Time or Scope.
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2024 FDD)
According to the 2024 Crawlspace Medic Franchise Disclosure Document, upon the expiration or earlier termination of the Franchise Agreement, or upon a Transfer, the franchisee and its principals are subject to certain restrictions for 24 months. Specifically, they cannot divert business from the Crawlspace Medic system, participate in a crawlspace or basement service business within 25 miles of the Territory or any Crawlspace Medic location, solicit employees of Crawlspace Medic, or perform any act that is injurious to the goodwill associated with the Crawlspace Medic brand.
However, the FDD also states that if the period of time or the geographic scope specified in the agreement is deemed unreasonable in any legal proceeding, the period of time will be reduced by such number of months or the geographic scope will be reduced by the elimination of such portion thereof, or both, so that such restrictions may be enforced for such time and scope as are adjudged to be reasonable. This means that a court could potentially reduce the non-compete period or geographic area if it finds the original terms to be overly restrictive.
This flexibility is further reinforced by a clause that allows Crawlspace Medic to unilaterally reduce the scope of any covenant set forth in the agreement without the franchisee's consent. This modification becomes effective immediately upon the franchisee receiving written notice. This clause provides Crawlspace Medic with the ability to adjust the non-compete restrictions to ensure they are reasonable and enforceable, potentially offering some relief to franchisees in specific situations.