Is a Dryer Vent Squad franchisee allowed to fund a Competitive Business?
Dryer_Vent_Squad Franchise · 2024 FDDAnswer from 2024 FDD Document
Agreement in the form attached as Exhibit 3.
6.D. RESTRICTIVE COVENANTS: UNFAIR COMPETITION AND IN-TERM NON-COMPETITION OBLIGATIONS
Franchisee agrees that during the Term of this Agreement, Franchisee shall not engage in the following activities (the "Prohibited Activities"): (a) owning and/or having any legal or equitable interest whether, as an individual proprietor, owner, partner, member or shareholder of a Corporate Entity, or, in any similar capacity, in a Competitive Business other than, owning an interest of 3% or less in a publicly traded company that is a Competitive Business; (b) operating, managing, funding and/or performing services whether, as an employee, officer, director, manager, consultant, representative, agent, and/or creditor or, in any similar capacity, for or benefitting a Competitive Business; (c) diverting or attempting to divert any business or customers from Franchisor or, one of Franchisor's affiliates or franchisees; (d) inducing any customer or client of Franchisor, Franchisor's affiliates, franchisees of the System, or, of Franchisee, to any other person or business that is not a Dryer Vent Squad Business; and/or (e) engaging in any actions, inactions, and/or activities in violation of Articles 6.B. and/or 6.C. of this Agreement (all, individually and collectively, referred to as the "Prohibited Activities"). Franchisee agrees that if Franchisee were to engage in the Prohibited Activities that such actions would be unfair, would constitute unfair competition and would cause harm to Franchisor, the System and other Dryer Vent Squad Business franchisees. Franchisee agrees that the foregoing covenants and obligations shall also apply to Franchisee's Owners and that Franchisee's Owners shall each execute and deliver to Franchisor the Franchise Owner Agreement and Individual Guaranty in the form attached to this Agreement as Exhibit 1.
6.E. RESTRICTIVE COVENANTS: UNFAIR COMPETITION AND POST-TERMINATION NON-COMPETITION OBLIGATIONS
Source: Item 23 — RECEIPTS (FDD pages 51–207)
What This Means (2024 FDD)
According to Dryer Vent Squad's 2024 Franchise Disclosure Document, a franchisee faces restrictions on involvement with competitive businesses during the term of the franchise agreement. Specifically, franchisees are prohibited from owning or having any legal or equitable interest in a Competitive Business, with a very limited exception. They can own an interest of 3% or less in a publicly traded company that is a Competitive Business. A "Competitive Business" is defined as any business similar to a Dryer Vent Squad Business, including those offering dryer vent cleaning, maintenance, or repair services.
This restriction extends beyond mere ownership. Franchisees are also barred from operating, managing, funding, or performing services for a Competitive Business, whether as an employee, officer, director, manager, consultant, agent, or creditor. This comprehensive prohibition aims to prevent franchisees from diverting business or customers away from Dryer Vent Squad. The agreement also prevents franchisees from encouraging customers to use a business that is not a Dryer Vent Squad Business.
These restrictions also apply to the franchisee's Owners, who must also sign agreements to this effect. Violation of these covenants constitutes unfair competition and can result in harm to Dryer Vent Squad, the System, and other franchisees. Prospective franchisees should carefully consider these restrictions and how they might impact any current or future business ventures.