Following termination of a Crawlspace Medic franchise agreement, what is the geographic radius within which franchisees are prohibited from participating in a competing crawlspace or basement service business?
Crawlspace_Medic Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
Source: Item 22 — CONTRACTS (FDD page 42)
What This Means (2024 FDD)
According to the 2024 Crawlspace Medic Franchise Disclosure Document, franchisees and their principals are restricted from engaging in any crawlspace or basement service business within a 25-mile radius of their former territory or any Crawlspace Medic location for a period of 24 months following the termination or expiration of the franchise agreement. This restriction applies whether the franchisee acts directly or indirectly, either for themselves or in conjunction with any other person or entity.
This non-compete clause prevents former franchisees from leveraging their knowledge and experience gained while operating a Crawlspace Medic franchise to unfairly compete with the brand. It protects Crawlspace Medic's market share and goodwill by ensuring that former franchisees do not immediately establish competing businesses in close proximity to existing franchises. The FDD also states that the franchisee acknowledges that these restrictions are reasonable and do not impose undue hardship, given their other skills and experiences.
However, the agreement also includes a provision that allows for the reduction of the time period or geographic scope of the non-compete clause if it is deemed unreasonable in any legal proceeding. Additionally, Crawlspace Medic retains the right to reduce the scope of the covenant at its discretion, effective immediately upon written notice to the franchisee. This flexibility allows for adjustments to the non-compete agreement based on specific circumstances and legal considerations.
Prospective franchisees should carefully consider the implications of this non-compete clause, especially if they plan to remain in the crawlspace or basement service industry after leaving the Crawlspace Medic system. They should evaluate whether the 25-mile radius and 24-month duration are acceptable and how these restrictions might impact their future business opportunities.