Under what circumstances will provisions of the Dermani Medspa franchise agreement continue to be performed after the agreement's expiration, termination, or transfer?
Dermani_Medspa Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Franchise Disclosure Document, certain provisions of the franchise agreement continue to be in effect after the termination, transfer, or expiration of the agreement. Specifically, the franchisee is restricted from engaging in any Competitive Business within the Development Area or within a five-mile radius of it, or near any other Dermani Medspa operating at the time the obligations commence. This restriction applies for two years, starting from the later of the effective date of termination, transfer, or expiration; the date when all restricted individuals begin complying with the non-compete obligations; or the date of a court order enforcing the agreement if litigation is necessary. The time during which the franchisee is in breach of these covenants will be added to the restricted period.
This non-compete clause extends not only to the franchisee but also to their immediate family members, preventing them from owning, operating, or being involved in any capacity with a Competitive Business. This includes acting as a partner, director, manager, employee, consultant, representative, or agent. An exception exists for equity ownership of less than 5% in a Competitive Business if its stock is publicly traded on a recognized U.S. stock exchange.
Dermani Medspa may also request that the franchisee ensure that their owners, officers, and directors execute similar covenants to prevent competition. This ensures that key individuals associated with the franchisee are also bound by the non-compete terms, further protecting Dermani Medspa's market and business interests even after the franchise agreement ends. This is a fairly standard practice in franchising to protect the brand and prevent former franchisees from using acquired knowledge to compete directly.