Is a Dermani Medspa franchisee allowed to own stock in a publicly traded Competitive Business after termination, transfer, or expiration?

According to the 2025 Dermani Medspa Franchise Disclosure Document, a franchisee is permitted to hold a limited equity stake in a publicly traded Competitive Business even after the termination, transfer, or expiration of their franchise agreement. Specifically, the document states that owning less than five percent (5%) of a Competitive Business's stock or other ownership interests does not violate the non-compete terms, provided that the business's stock is publicly traded on a recognized United States stock exchange. This allowance provides some flexibility for franchisees to diversify their investments without necessarily breaching their contractual obligations to Dermani Medspa.

This provision is fairly standard in franchise agreements, as it recognizes that franchisees should not be unduly restricted from participating in the broader stock market. The five percent threshold is designed to prevent franchisees from having a significant controlling interest in a competing business while still allowing them to hold minor investments. This clause applies specifically after the termination, expiration, or transfer of the franchise agreement, meaning that during the term of the agreement, similar restrictions apply regarding involvement with competitive businesses.

It is important for prospective Dermani Medspa franchisees to understand the implications of this clause. While it allows for minor investments in publicly traded competitors, any ownership stake of five percent or greater could be considered a breach of the franchise agreement, potentially leading to legal repercussions. Franchisees should also be aware that this clause is in addition to other non-compete restrictions that may limit their ability to operate or be involved in competing businesses within a certain geographic area for a specified period after leaving the Dermani Medspa system. Therefore, consulting with a legal professional is advisable to fully grasp the scope and limitations of these covenants.