Is a Dermani Medspa member allowed to have a non-controlling interest in a Competitive Business during the term of the Area Development Agreement?
Dermani_Medspa Franchise · 2025 FDDAnswer from 2025 FDD Document
y be communicated to Member or which Member may learn by virtue of Member's relationship with Developer. All information, knowledge and know-how relating to Franchisor, its business plans, Franchised Businesses, or the System ("Confidential Information") is deemed confidential, except for information that Member can demonstrate came to Member's attention by lawful means prior to disclosure to Member or which, at the time of the disclosure to Member, had become a part of the public domain. In addition, there may be certain, limited circumstances where applicable law allows for the disclosure of certain trade secrets, as specified in the Manuals.
2. Covenants Not to Compete.
(a) Member specifically acknowledges that, pursuant to the Area Development Agreement, and by virtue of his or her position with Developer, Member will receive valuable specialized training and Confidential Information, including, without limitation, information regarding the operational, sales, promotional, and marketing methods and techniques of Franchisor and the System.
(b) Member covenants and agrees that during the term of the Area Development Agreement, except as otherwise approved in writing by Franchisor, Member will not, either directly or indirectly, for him or herself, or through, on behalf of, or in conjunction with any person, persons, partnership, corporation, or entity:
(i) develop, build, own, maintain, operate, manage, engage in, franchise, or license, or have any direct or indirect controlling or non-controlling interest as an owner – whether of record, beneficially, or otherwise – in medical spa centers or businesses that offer medical spa products or services substantially similar to those then offered by dermani MEDSPA®s ("Competitive Business");
Source: Item 23 — RECEIPTS (FDD pages 66–311)
What This Means (2025 FDD)
According to the 2025 Dermani Medspa FDD, a member is generally prohibited from having any direct or indirect controlling or non-controlling interest in a Competitive Business during the term of the Area Development Agreement. A Competitive Business is defined as medical spa centers or businesses that offer medical spa products or services substantially similar to those offered by Dermani Medspa. This restriction applies unless the franchisor provides written approval allowing such an interest.
However, there is an exception to this rule. A Dermani Medspa member may hold an equity ownership of less than five percent (5%) of a Competitive Business if the business's stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange. In this specific case, the ownership would not be considered a violation of the non-compete agreement.
This non-compete clause is typical in franchising to protect the brand's confidential information, operational methods, and market position. The restriction ensures that members, who gain valuable knowledge and training from Dermani Medspa, do not use that information to benefit a competing business during their agreement. The exception for minor, publicly traded stock holdings acknowledges that such small investments are unlikely to pose a significant competitive threat.