What are the restrictions on a Degree Wellness franchisee's ability to operate a competing business during the term of the franchise agreement, considering their obligations under the agreement (Item 9)?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
You agree that we would be unable to protect the Confidential Information against unauthorized use or disclosure, and would be unable to encourage a free exchange of ideas and information among Degree Wellness franchises, if franchise owners of Degree Wellness franchises were permitted to hold interests in any competitive businesses (as described below).
Therefore, during the Term of this Agreement, neither you, nor any Principal Owner, nor any member of your immediate family or of the immediate family of any Principal Owner, shall directly or indirectly perform services for, or have any direct or indirect interest as an owner, investor, partner, director, officer, employee, manager, consultant, representative, or agent in, any business that offers products or services the same as or similar to those offered or sold at Degree Wellness Studio franchises; provided, however, that the ownership of one percent (1%) or less of a publicly traded company will not be deemed to be prohibited by this Paragraph.
- b.
Non-Disparagement.
You agree that during the Term of this Agreement, and thereafter following any Transfer, termination or expiration of this Agreement, neither you, nor any Principal Owner, nor any member of your immediate family or of the immediate family of any Principal Owner, will directly or indirectly make any negative or critical statements to any third parties, either verbally or in any other form or media, about (a) us, the Franchise, any of our franchisees, or any of their respective products, services, businesses or business practices, or (b) the actions, operations or character of any of our or their respective owners, officers, directors, employees, consultants or agents.
- c.
Non-Solicitation.
You agree that during the Term of this Agreement, and thereafter for a period of two (2) years following any Transfer, termination or expiration of this Agreement, neither you, nor any Principal Owner, nor any member of your immediate family or of the immediate family of any Principal Owner, will directly or indirectly (a) solicit for wellness or related services or products with any person who was a member or client of the Franchise within the two year period prior to such Transfer, termination or expiration; or (b) interfere with our relationship with any of our franchisees, vendors, suppliers or referral sources.
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, franchisees face specific restrictions on operating competing businesses during the term of the franchise agreement. During the agreement term, the franchisee, any principal owner, or any member of their immediate family cannot directly or indirectly perform services for or have any interest in any business that offers products or services similar to those offered at Degree Wellness Studio franchises. However, owning one percent or less of a publicly traded company is an exception to this restriction.
This restriction is in place to protect Degree Wellness's confidential information and encourage the free exchange of ideas among franchisees. The FDD states that allowing franchise owners to hold interests in competitive businesses would hinder the protection of confidential information. This non-compete obligation extends to preventing negative or critical statements about Degree Wellness, its franchisees, or their business practices during the term of the agreement and even after termination or expiration.
Furthermore, franchisees are prohibited from soliciting wellness services or products from anyone who was a member or client of the Degree Wellness franchise within two years prior to the termination or expiration of the agreement. They are also barred from interfering with Degree Wellness's relationships with its franchisees, vendors, suppliers, or referral sources for a period of two years after the agreement ends. These measures collectively aim to safeguard Degree Wellness's market position and proprietary information.
These restrictions are typical in franchise agreements to protect the brand and prevent franchisees from using the franchisor's knowledge and resources to compete against the system. Prospective Degree Wellness franchisees should carefully consider these limitations and how they might impact their future business endeavors.