After the Dermani Medspa Area Development Agreement expires, terminates, or is transferred, which provisions will continue to be in effect?
Dermani_Medspa Franchise · 2025 FDDAnswer from 2025 FDD Document
9.1.5. Upon termination, transfer, or expiration of this Agreement you agree that, for two (2) years beginning on the later of (i) the effective date of termination, transfer, or expiration, or (ii) the date on which all persons restricted by this Section 9.2 begin to comply with this Section 9.2, or (iii) if litigation is necessary to enforce this Agreement, the date of entry of an order by a court of competent jurisdiction enforcing this Agreement: you and your immediate family members, for yourself, or through, on behalf of, or in conjunction with any person, persons, partnership, corporation, limited liability company, or other entity, will not own, maintain, operate, engage in, manage, franchise or license, or have any direct or indirect controlling or non-controlling interest as an owner (whether of record, beneficially, or otherwise) or be or perform services as a partner, director, manager, employee, consultant, representative, or agent in any Competitive Business, that is, or is intended to be, located within the Development Area, or within a five (5) mile radius of the boarder of the Development Area or any other dermani MEDSPA® operating at the time the obligations under this Section 8.2 commence, except as permitted by any franchise agreements that remain in effect between you and us. You agree that the length of time in this Section 9.2 will be tolled for any period during which you are in breach of the covenants set forth in this Section 9.2, or any other period during which we seek to enforce this Agreement.
9.1.6. Equity ownership of 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 will not be deemed to violate this Section 9.
9.2. Individual Covenants.
At our request, you shall require and obtain execution of covenants similar to those set forth in Sections 9.1 and 9.2 (as modified to apply to an individual) from any or all of the following persons: Your Owners, officers and directors.
Source: Item 23 — RECEIPTS (FDD pages 66–311)
What This Means (2025 FDD)
According to the 2025 Dermani Medspa FDD, after the Area Development Agreement is terminated, transferred, or expires, certain covenants regarding competition remain in effect. For a period of two years, the developer and their immediate family are restricted from owning, operating, or being involved in any competitive business within the Development Area or within a five-mile radius of any Dermani Medspa location. This restriction applies to any role, including owner, operator, manager, employee, or consultant, unless otherwise permitted by existing franchise agreements between the developer and Dermani Medspa. This non-compete clause is standard in franchising to protect the brand and market share.
The time frame of this restriction can be extended if the developer breaches the non-compete covenants or if Dermani Medspa has to pursue litigation to enforce the agreement. This ensures that Dermani Medspa is not penalized for the time it takes to enforce the agreement if a breach occurs.
An exception to this restriction exists for equity ownership of less than 5% in a publicly traded competitive business on a recognized U.S. stock exchange. Additionally, Dermani Medspa may request that the developer ensure that their owners, officers, and directors also agree to similar covenants. This comprehensive approach aims to prevent any potential competitive threat following the termination, transfer, or expiration of the Area Development Agreement.