Does the non-competition restriction for Dog Haus apply to an Owner after they cease to be associated with the Area Developer?
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, there are non-competition restrictions that apply to an Owner during the term of the agreement and after the expiration or termination of the agreement. During the term of the agreement, an Owner cannot engage in any Competitive Business, or any act that is injurious to the goodwill associated with the Dog Haus marks and system. However, these restrictions do not apply to any Owner after two years from the date they cease to be associated with the Area Developer as an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or in any other capacity.
After the expiration or termination of the agreement, an Owner is restricted from owning, engaging in, or rendering services to any Competitive Business located at a Franchised Location or within a two-mile radius of any Dog Haus Restaurant or Franchised Location. This restriction lasts for two years. However, this restriction does not apply to any Owner after two years from the date the Owner ceases to be associated with the Area Developer in the Development Area as an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or in any other capacity.
Both during the term of the agreement and after the expiration or termination of the agreement, these non-compete covenants do not apply to ownership by an Area Developer or Owner of less than 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 1934. This means that a former Dog Haus Owner can invest in a publicly traded competitor, as long as their stake is below the 5% threshold.