What happens to the goodwill associated with a Devon Creek franchise upon termination of the agreement?
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, franchisees are restricted from actions that could negatively impact the goodwill associated with the Devon Creek brand, both during the term of the agreement and for a period of time after termination. Specifically, franchisees must not engage in activities that could harm the goodwill associated with the marks and the Devon Creek system.
During the term of the agreement, franchisees and their principals are prohibited from diverting business, customers, or referral sources to competitors, participating in similar lawn care businesses, or performing any act that could be injurious or prejudicial to the goodwill associated with the Devon Creek marks and system. These restrictions also extend for twenty-four months after the agreement expires or is terminated. During this post-term period, franchisees are restricted from operating a similar business within twenty-five miles of their former territory or within fifty miles of any Devon Creek office location.
These covenants are designed to protect Devon Creek's brand reputation and market position. The franchise agreement states that these restrictions are considered reasonable to protect the goodwill and business interests of the franchisor. If any of the restrictions are deemed unreasonable, they may be reduced in scope to be enforceable.
In practical terms, this means that upon termination of the franchise agreement, a former Devon Creek franchisee must avoid any actions that could damage the brand's reputation or take away business from the Devon Creek system. This includes refraining from operating a competing business in the immediate vicinity and avoiding any behavior that could negatively impact the goodwill that Devon Creek has established. These measures are typical in franchising to ensure brand consistency and protect the franchisor's investment in its trademarks and system.