What is the 'Restricted Period' mentioned in the Dryer Vent Squad franchise agreement regarding post-term non-competition?
Dryer_Vent_Squad Franchise · 2024 FDDAnswer from 2024 FDD Document
"Restricted Period" refers to and means the 24 month period after the earliest to occur of the following: (a) the expiration of the Franchise Agreement; (b) the termination of the Franchise Agreement; (c) the date on which Franchisee assigns the Franchise Agreement to another person (other than you or an Immediate Family Member) provided that you do not own or hold, in the assignee, any direct or indirect ownership and/or equity interest whether legal, equitable or otherwise; or (d) if you are an Owner of Franchisee, the date on which you cease to be an Owner of Franchisee. Provided however, that if a court of competent jurisdiction determines that this period of time is too long to be enforceable, then the "Restricted Period" means the 18 month period after the earliest to occur of the following: (a) the expiration of the Franchise Agreement; (b) the termination of the Franchise Agreement; (c) the date on which Franchisee assigns the Franchise Agreement to another person (other than you or an Immediate Family Member) provided that you do not own or hold, in the assignee, any direct or indirect ownership and/or equity interest whether legal, equitable or otherwise; or (d) if you are an Owner of Franchisee, the date on which you cease to be an Owner of Franchisee.
Source: Item 23 — RECEIPTS (FDD pages 51–207)
What This Means (2024 FDD)
According to Dryer Vent Squad's 2024 Franchise Disclosure Document, the "Restricted Period" defines the length of time a franchisee is subject to post-termination non-compete obligations. The standard Restricted Period is 24 months, beginning from the earliest of: the expiration of the Franchise Agreement, the termination of the Franchise Agreement, the date the franchisee assigns the Franchise Agreement to another party where the franchisee retains no ownership, or the date an owner ceases to be an Owner of the Franchisee.
However, the Dryer Vent Squad franchise agreement includes a clause addressing enforceability. If a court deems the 24-month period too long to be enforceable, the Restricted Period is automatically reduced to 18 months, calculated from the same triggering events (expiration, termination, assignment without ownership, or ceasing to be an owner). This demonstrates an attempt by Dryer Vent Squad to ensure the non-compete is upheld by a court by providing an alternative, shorter duration.
This post-term non-compete is a standard practice in franchising, designed to protect the franchisor's brand and market share. Prospective Dryer Vent Squad franchisees should be aware of these restrictions, as they will limit their ability to engage in similar businesses for a period after leaving the Dryer Vent Squad system. Franchisees should carefully consider the implications of these restrictions on their future business endeavors and consult with legal counsel to understand the enforceability of these clauses in their specific jurisdiction.