Can a Dryer Vent Squad franchisee operate a Competitive Business as an employee?
Dryer_Vent_Squad Franchise · 2024 FDDAnswer from 2024 FDD Document
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.
Source: Item 23 — RECEIPTS (FDD pages 51–207)
What This Means (2024 FDD)
According to the 2024 Dryer Vent Squad Franchise Disclosure Document, during the term of the agreement, franchisees are restricted from engaging in certain activities considered "Prohibited Activities." These restrictions are designed to prevent unfair competition.
Specifically, a Dryer Vent Squad franchisee is prohibited from operating, managing, funding, or performing services for a Competitive Business, whether as an employee, officer, director, manager, consultant, representative, agent, or creditor. The term "Competitive Business" is defined as any business that is the same as or similar to a Dryer Vent Squad Business, including those offering residential or commercial dryer vent cleaning, maintenance, or repair services.
This restriction also extends to the franchisee's owners, who are required to sign a Franchise Owner Agreement and Individual Guaranty. However, franchisees are allowed to own an interest of 3% or less in a publicly traded company that is considered a Competitive Business. This in-term non-compete obligation is designed to protect Dryer Vent Squad's market position and prevent franchisees from using the franchisor's resources and knowledge to benefit a competing business during the term of the franchise agreement.