What is the penalty for a Degree Wellness franchisee violating the non-recruitment agreement?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
You agree not to recruit or hire, either directly or indirectly, any employee (or a former employee, for six (6) months after his or her employment has ended) of any Degree Wellness Studio operated by us, our affiliates, or another Degree Wellnessfranchise owner without first obtaining the written consent of us, our affiliate, or the franchise owner that currently employs (or previously employed) such employee. (If you violate this provision, in addition to any other right or remedy we may have, you agree to pay the employee's current or former employer twice the employee's annual salary, plus all costs and attorneys' fees incurred as a result of the violation. This amount is set at twice the employee's annual salary because it is a reasonable estimation of the damages that would occur from such a breach, and it will almost certainly be impossible to calculate precisely the actual damages from such a breach.)
Source: Item 23 — Receipts (FDD pages 66–257)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, a franchisee who violates the non-recruitment agreement may face significant financial penalties. Specifically, if a Degree Wellness franchisee recruits or hires an employee from another Degree Wellness studio (including those operated by the franchisor or its affiliates) without prior written consent, the franchisee must pay the employee's current or former employer twice the employee's annual salary.
In addition to the salary-based penalty, the violating franchisee is also responsible for covering all costs and attorneys' fees incurred by the other party as a result of the violation. Degree Wellness states that the amount is set at twice the employee's annual salary because it is a reasonable estimation of the damages that would occur from such a breach, and it will almost certainly be impossible to calculate precisely the actual damages from such a breach.
This provision highlights the importance of respecting the non-recruitment agreement within the Degree Wellness franchise system. It aims to protect franchisees and the franchisor from the loss of valuable employees and the associated costs of finding and training replacements. Prospective franchisees should carefully consider this potential financial burden and ensure they have systems in place to prevent inadvertent violations of the non-recruitment agreement.