Can a Crisp & Green franchisee divert business from a Crisp & Green Restaurant to a Competitive Business?
Crisp_Green Franchise · 2024 FDDAnswer from 2024 FDD Document
I further agree that, during the term of my employment/service/association or ownership participation, I will not, directly or indirectly, engage or participate in any Competitive Business (defined below in this paragraph), any of which such prohibited behavior I understand and hereby explicitly acknowledge would or could be injurious to, or (in Franchisor's sole judgment) have an adverse effect upon, Franchisor's protectable interests in the Confidential Information, the CRISP & GREEN trademark, or the goodwill and/or reputation of Restaurants generally. I agree that I am prohibited from engaging in any Competitive Business as a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant. For purposes of this Agreement, a "Competitive Business" means any business that: (1) operates as a restaurant or similar food-service provider and derives more than twenty percent (20%) of its revenue from selling salads and grain bowls in a fast-food, quick-service, drive-thru or drive-in format; or (2) grants franchises or licenses to others to operate the type of business specified in the preceding subparagraph (other than a CRISP & GREEN-branded restaurant operated under a franchise agreement with Franchisor). Despite the foregoing definition of a Competitive Business, nothing under this Agreement or the Franchise Agreement will prevent Individual from owning for investment purposes less than five percent (5%) of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange, and so long as neither Individual nor Franchisee controls the company in question.
Source: Item 23 — RECEIPTS (FDD pages 66–252)
What This Means (2024 FDD)
According to the 2024 Crisp & Green Franchise Disclosure Document, franchisees are restricted from engaging in any Competitive Business that could harm the franchisor's interests. A "Competitive Business" is defined as any business operating as a restaurant or food-service provider that derives more than 20% of its revenue from selling salads and grain bowls in a fast-food, quick-service, drive-thru, or drive-in format, or any business that grants franchises or licenses to others to operate such a business. This restriction applies during the term of the franchisee's association or ownership participation.
The franchisee is prohibited from participating in a Competitive Business as a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant. This broad definition aims to prevent franchisees from directly or indirectly supporting competing businesses that could negatively impact the Crisp & Green brand. However, an individual can own less than 5% of a Competitive Business if its stock is publicly traded on a recognized U.S. stock exchange, provided that neither the individual nor the franchisee controls the company.
These restrictions are in place to protect Crisp & Green's confidential information, trademarks, goodwill, and reputation. By preventing franchisees from engaging with competing businesses, Crisp & Green aims to maintain the integrity of its brand and the uniformity of its high-quality standards across all franchise locations. Prospective franchisees should carefully consider these restrictions and ensure they do not have any conflicting interests before entering into a franchise agreement with Crisp & Green.