What is the exception to the non-compete covenants for Dog Haus franchisees regarding ownership of equity securities in a Competitive Business?
Dog_Haus Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee and each Owner covenants that during the Term, except as otherwise approved in writing by Franchisor, Franchisee 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 15.2 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 Franchisee.
Source: Item 22 — CONTRACTS (FDD page 87)
What This Means (2025 FDD)
According to Dog Haus's 2025 Franchise Disclosure Document, there is an exception to the non-compete covenants for owners of a Dog Haus franchise. The restrictions against owning, engaging in, or rendering services to a Competitive Business do not apply to any owner after two years from the date they cease to be associated with the franchisee. This association includes being an officer, director, shareholder, member, manager, trustee, owner, general partner, employee, or otherwise associated in any capacity with the franchisee.
This means that while the franchise agreement is in effect and for a period after the agreement expires or is terminated, franchisees and their owners are generally restricted from being involved with competing businesses. However, once an individual owner has disassociated from the Dog Haus franchise for at least two years, the non-compete restrictions no longer apply to them. They are then free to own or work for a competing business without violating the franchise agreement.
This provision provides a degree of flexibility for individuals who may have been involved in the Dog Haus franchise but later wish to pursue other opportunities in the same industry. It balances the franchisor's need to protect its business interests with the individual's right to work and invest freely after a reasonable period of separation from the franchise. This type of clause is fairly common in franchise agreements, as it allows individuals to move on from the franchise without being permanently barred from the industry.