After termination or expiration of the Dermani Medspa agreement, for how long does the covenant not to compete last?
Dermani_Medspa Franchise · 2025 FDDAnswer from 2025 FDD Document
15.4. Covenant Not to Compete.
15.4.1. Upon termination or expiration of this Agreement you agree that, for two (2) years beginning on the later to occur of (i) the effective date of termination or expiration, or (ii) the date on which all persons restricted by this Section 15.4 begin to comply with this Section 15.4, 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, 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 may be located or operating:
- (a) at the Premises;
- (b) within the Territory;
- (c) within five (5) miles of the border of the Territory; or;
- (d) within the territory, area, or market area of any other Franchised Business or Medspa in operation or under construction on the latter of the effective date of the
termination or expiration of this Agreement or the date on which all persons restricted by this Section begin to comply with this Section.
15.4.2.
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 15.4.
- 15.4.3.
These restrictions also apply after transfers, as provided in Section 12 above.
If any person restricted by this Section refuses voluntarily to comply with these obligations, the two (2) year period for that person will commence with the entry of a court order enforcing this provision.
You expressly acknowledge that you possess skills and abilities of a general nature and have other opportunities for exploiting these skills.
Source: Item 23 — RECEIPTS (FDD pages 66–311)
What This Means (2025 FDD)
According to Dermani Medspa's 2025 Franchise Disclosure Document, franchisees are subject to a covenant not to compete for a period of two years after the termination or expiration of their franchise agreement. This restriction begins on the later of three possible dates: (1) the effective date of the termination or expiration, (2) the date when all individuals bound by the non-compete provision begin to comply with it, or (3) if Dermani Medspa pursues litigation to enforce the agreement, the date a court order is issued to that effect.
During this two-year period, the franchisee and their immediate family members are prohibited from owning, operating, managing, engaging in, franchising, or licensing any Competitive Business. This includes holding any direct or indirect controlling or non-controlling interest in such a business, or providing services as a partner, director, manager, employee, consultant, representative, or agent. The restriction applies to businesses located at the original premises, within the defined territory, within five miles of the territory's border, or within the territory of any other Dermani Medspa location that is either operating or under construction.
There is an exception to this restriction: owning less than 5% of a Competitive Business is permitted if its stock is publicly traded on a recognized U.S. stock exchange. Furthermore, the duration of the non-compete period can be extended if the franchisee breaches the covenant or if Dermani Medspa needs to take legal action to enforce the agreement. These non-compete obligations also apply after transfers of the franchise.
It is important for prospective Dermani Medspa franchisees to understand the scope and duration of this non-compete clause, as it significantly restricts their ability to engage in similar business activities after leaving the franchise system. Franchisees should carefully consider the geographic limitations and the types of activities that are prohibited, as well as the potential for the non-compete period to be extended under certain circumstances.