After termination or expiration of the Dermani Medspa agreement, for how long are franchisees restricted from engaging in a competitive business?
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 Dermani Medspa's 2025 Franchise Disclosure Document, franchisees are restricted from engaging in a competitive business for a period of two years after the termination, transfer, or expiration of the Franchise Agreement. This restriction begins on the later of three possible dates: (1) the effective date of the termination, transfer, or expiration; (2) the date when all individuals bound by the non-compete clause 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. This two-year period can be extended if the franchisee breaches the non-compete covenants or if Dermani Medspa has to take legal action to enforce the agreement.
The restrictions prevent the franchisee and their immediate family from owning, operating, managing, franchising, or having any interest in a competitive business. This includes acting as a partner, director, manager, employee, consultant, representative, or agent in a competitive business. The competitive business is defined as one that is located within the Development Area or within a five-mile radius of the Development Area's border, or near any other Dermani Medspa location operating at the time the non-compete obligations begin.
However, there is an exception: owning less than 5% of a publicly traded Competitive Business on a recognized U.S. stock exchange does not violate this non-compete agreement. Dermani Medspa may also require owners, officers, and directors to sign similar non-compete agreements. This means that a franchisee needs to be aware of these limitations if they plan to exit the Dermani Medspa system and pursue other business ventures in the same or similar industry within the specified geographic area.