Does the Crisp & Green non-compete agreement prevent participation in a Competitive Business as a shareholder?
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 Crisp & Green's 2024 Franchise Disclosure Document, franchisees are generally prohibited from participating in a Competitive Business. A Competitive Business is defined as any business that operates as a restaurant or similar food-service provider and 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 grants franchises or licenses to others to operate that type of business. This restriction applies to involvement as a proprietor, partner, investor, shareholder, director, officer, employee, principal, agent, advisor, or consultant.
However, there is an exception to this non-compete clause regarding shareholding. The agreement does not prevent an individual from owning less than 5% of a Competitive Business for investment purposes, provided that the stock or ownership interests are publicly traded on a recognized United States stock exchange. Additionally, neither the individual nor the franchisee can control the company in question.
This exception allows a Crisp & Green franchisee to make minor investments in publicly traded competitors without violating the non-compete agreement, as long as the ownership stake remains below 5% and they do not exert control over the competitor. This provision balances the franchisor's need to protect its business interests with the franchisee's ability to diversify their investments.