Is a Devon Creek franchisee required to comply with non-disclosure covenants after termination?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
In consideration for such specialized training, trade secrets, Confidential Information and rights, Franchisee and each Principal covenant that, except as otherwise approved in writing by Franchisor:
- 19.5.1 During the term of this Agreement, Franchisee and each Principal shall not, either directly or indirectly, for themselves or through, on behalf of, or in conjunction with, any person or entity (i) divert, or attempt to divert, any business, customer or referral source of the Franchised Business or of other franchisees in the System to any competitor, by direct or indirect inducement or otherwise; (ii) participate as an owner, partner, director, officer, employee, consultant or agent or serve in any other capacity in any residential or commercial lawncare or servicing business similar to the System; or (iii) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System or (iv) in any
manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Devon Creek franchisees or Franchisor-affiliated outlets.
19.5.2 Upon the expiration or earlier termination of this Agreement or upon a Transfer and continuing for twenty-four (24) months thereafter, Franchisee and Principals shall not, either directly or indirectly, for themselves or through, on behalf of or in conjunction with any person or entity (i) divert, or attempt to divert, any business, customer or referral source of the Franchised Business, Franchisor or of other franchisees in the System to any competitor, by direct or indirect inducement or otherwise; or (ii) participate as an owner, partner, director, officer, employee, consultant or agent or serve in any other capacity in any residential or commercial lawncare business within twenty-five (25) miles of the Territory or within fifty (50) miles of any Devon Creek office location; or (iii) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System or (iv) in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Devon Creek franchisees.
19.6 Reasonableness of Restrictions.
Source: Item 22 — CONTRACTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, both the franchisee and its principals are subject to non-disclosure and non-competition covenants both during the term of the agreement and for a period of time after termination or expiration. Specifically, after the agreement ends, the franchisee and principals must not divert business, customers, or referral sources to competitors, nor participate in a similar lawn care business within a defined geographic area. These restrictions are in place for 24 months after termination or expiration of the franchise agreement.
The non-compete extends to not being involved as an owner, partner, director, officer, employee, consultant, or agent in any residential or commercial lawncare business within twenty-five (25) miles of the Territory or within fifty (50) miles of any Devon Creek office location. These restrictions are designed to protect Devon Creek's goodwill, trade secrets, and confidential information.
The FDD states that these covenants are considered reasonable in terms of time, geographical area, and scope. However, if any court finds the restrictions unreasonable, the terms will be adjusted to be enforceable. This ensures that Devon Creek can protect its business interests while also allowing the franchisee to pursue other opportunities within reasonable limits after the franchise agreement concludes.
Moreover, upon termination or expiration, the franchisee must cease operating the franchised business and discontinue using Devon Creek's marks, copyrighted material, and other intellectual property. They must also cancel any assumed name registrations containing Devon Creek's trademarks and pay all outstanding sums to Devon Creek and its affiliates. These obligations, including those related to non-disclosure and non-competition, survive the termination or expiration of the franchise agreement, reinforcing the ongoing responsibilities of the franchisee and principals.