What is considered a 'Competitive Business' in relation to a Dog Haus franchise?
Dog_Haus Franchise · 2025 FDDAnswer from 2025 FDD Document
- Non-Competition During Term of Agreement.
Area Developer and each Owner covenants that during the Term, except as otherwise approved in writing by Franchisor, Area Developer and each Owner shall not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, or legal Entity (i) divert or attempt to divert any present or prospective Dog Haus customer to any Competitive Business, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Dog Haus Marks and the Dog Haus System; or (ii) own (either beneficially or of record), engage in or render services to, whether as an investor, partner, lender, director, officer, manager, employee, consultant, representative or agent, any Competitive Business, provided, however, the restrictions stated in this Section 13.2 shall not apply to any Owner after two (2) years from the date the Owner ceases to be an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or otherwise associated in any capacity with Area Developer.
- 13.3 Non-Competition After Expiration or Termination of Agreement.
Except as Franchisor otherwise approves in writing, commencing upon the date of: (i) an Assignment permitted under Article 9; (ii) the Expiration Date of this Agreement; (iii) the termination of this Agreement (regardless of the cause for termination); or (iv) a final court order (after all appeals have been taken) with respect to any of the foregoing events or with respect to enforcement of this Section 13.3, and continuing for an uninterrupted period of two (2) years thereafter, Area Developer and each Owner shall not, own (either beneficially or of record), engage in or render services to, whether as an investor, partner, lender, director, officer, manager, employee, consultant, representative or agent, any Competitive Business located at a location designated as a "Franchised Location" in a Franchise Agreement between Franchisor, as franchisor, and Area Developer, or an Affiliate or Owner of Area Developer, as franchisee, except in accordance with the terms of an effective Franchise Agreement between Franchisor, as franchisor, and Area Developer, or an Affiliate or Owner of Area Developer, as franchisee, or any location within a two (2) mile radius of any Dog Haus Restaurant or a Franchised Location as defined above; provided, however, the restrictions stated in this Section 13.3 shall not apply to any Owner after two (2) years from the date the Owner ceases to be an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or otherwise associated in any capacity with Area Developer in the Development Area.
- 13.4 Exceptions to Non-Compete Covenants.
Sections 13.2 and 13.3 shall not apply to ownership by Area Developer or an Owner of a less than five percent (5%) beneficial interest in the outstanding equity securities of any Competitive Business registered under the Securities Act of 1833 or the Securities Exchange Act of 1834.
Source: Item 23 — RECEIPTS (FDD pages 87–328)
What This Means (2025 FDD)
According to Dog Haus's 2025 Franchise Disclosure Document, during the term of the agreement, franchisees and owners are restricted from involvement with any 'Competitive Business,' which is not explicitly defined in the provided excerpts. The document states that franchisees cannot divert customers to a Competitive Business or perform any act that could harm the goodwill associated with the Dog Haus brand and system. This restriction includes owning, engaging in, or providing services to a Competitive Business, whether as an investor, partner, lender, director, officer, manager, employee, consultant, representative, or agent. However, these restrictions do not apply to owners after two years from the date they cease association with the Area Developer.
After the agreement expires or is terminated, the non-competition clause remains in effect for two years. During this period, franchisees and owners are prohibited from being involved with any Competitive Business located at a designated 'Franchised Location' or within a two-mile radius of any Dog Haus Restaurant or Franchised Location. This restriction applies unless Dog Haus provides written approval otherwise.
There is an exception to these non-compete covenants: ownership of less than 5% of the equity securities of any Competitive Business registered under the Securities Act of 1833 or the Securities Exchange Act of 1834 is permitted.
Since the FDD excerpts do not provide a concrete definition of 'Competitive Business,' prospective franchisees should seek clarification from Dog Haus regarding what specific types of businesses would be considered competitive. Understanding this definition is crucial for franchisees to avoid violating the non-compete agreements during and after the franchise term.