What is the non-compete obligation during the term of the Dryer Vent Squad Franchise Agreement?
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 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD page 40)
What This Means (2024 FDD)
According to the 2024 Dryer Vent Squad Franchise Disclosure Document, during the term of the Franchise Agreement, franchisees are restricted from engaging in activities considered "Prohibited Activities." These activities include owning or having any legal or equitable interest in a Competitive Business, with a minor exception of owning 3% or less in a publicly traded company that is a Competitive Business. Franchisees are also prohibited from operating, managing, funding, or performing services for a Competitive Business, diverting business or customers from Dryer Vent Squad, and inducing any customer or client to another business that is not a Dryer Vent Squad Business.
These restrictions also apply to the franchisee's Owners, who are required to sign a Franchise Owner Agreement and Individual Guaranty. The FDD states that engaging in these Prohibited Activities would be considered unfair competition and would cause harm to Dryer Vent Squad, the System, and other Dryer Vent Squad franchisees.
In summary, the in-term non-compete obligations are designed to protect Dryer Vent Squad's business interests by preventing franchisees from directly or indirectly supporting competing businesses during the term of their agreement. This is a standard practice in franchising to maintain brand consistency and prevent franchisees from leveraging the franchisor's resources to benefit a competitor.