What is the geographic scope of the restrictive covenant for a Dermani Medspa Practice after the termination or expiration of the agreement?
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 termination, transfer, or expiration of the Franchise Agreement, the franchisee is subject to a restrictive covenant that limits their ability to engage in competitive business activities. This covenant extends for two years, beginning from the later of (i) the effective date of termination, transfer, or expiration, (ii) the date on which all persons restricted begin to comply with the restrictions, or (iii) if litigation is necessary, the date of a court order enforcing the agreement.
The geographic scope of this restriction includes the Development Area and a five-mile radius from the border of the Development Area. It also covers any other Dermani Medspa operating at the time the obligations commence. This means a franchisee cannot own, operate, manage, franchise, license, or have any direct or indirect interest in a Competitive Business within these areas.
There is an exception for equity ownership of less than 5% in a Competitive Business if its stock is publicly traded on a recognized United States stock exchange. The agreement also specifies that the duration of the non-compete period will be extended for any time the franchisee is in breach of the covenant or while Dermani Medspa is seeking to enforce the agreement. Dermani Medspa may also require similar covenants from the franchisee's owners, officers, and directors.