Does the Dryject agreement prevent franchisees from owning less than a 5% beneficial interest in publicly traded corporations?
Dryject Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Except to the extent prohibited by the laws of the state where the Franchised Business is located, in order to protect the goodwill and unique qualities of DRYJECT SYSTEM and the confidentiality and value of Franchisor's Trade Secrets, and in consideration for the disclosure to Signer of Franchisor's Trade Secrets, Signer further undertakes and covenants that, during the time Franchisee is a franchisee of Franchisor and for the two (2) years following the termination or expiration of Franchisee's Franchise Agreement, Signer will not:
- (a) Directly or indirectly, for himself/herself or through, on behalf of or in conjunction with any person, partnership or business entity, engage in or acquire any financial or beneficial interest in (including interest in business entities, partnerships, trusts, unincorporated associations or joint ventures), advise, help or make loans to any entity involved in business which is the same as or similar to that conducted by "DryJect"® which business is, or is intended to be located, within the United States; or
Source: Item 8 — BUSINESS RELATIONSHIP (FDD pages 68–229)
What This Means (2025 FDD)
Based on the 2025 Dryject Franchise Disclosure Document, the agreement does not explicitly prevent franchisees from owning less than a 5% beneficial interest in publicly traded corporations. However, the agreement does state that franchisees cannot "engage in or acquire any financial or beneficial interest in (including interest in business entities, partnerships, trusts, unincorporated associations or joint ventures), advise, help or make loans to any entity involved in business which is the same as or similar to that conducted by 'DryJect'® which business is, or is intended to be located, within the United States".
This clause restricts franchisees from having a financial interest in businesses similar to Dryject within the United States. While it doesn't specify a minimum ownership percentage in publicly traded companies, it broadly restricts involvement in competing businesses. This restriction applies not only to the franchisee but also to anyone who has access to Dryject's trade secrets, such as employees or those signing a confidentiality agreement.
Furthermore, if the franchisee is a business entity, individuals with a twenty percent (20%) or greater ownership interest must sign a Guaranty Agreement. The business entity's stated purpose must consist only of the Dryject franchise, and issuing additional stock or transferring ownership interests requires Dryject's prior written consent. These stipulations ensure Dryject maintains control over the franchise and prevents conflicts of interest.
Prospective franchisees should seek clarification from Dryject regarding the extent to which these restrictions apply to investments in publicly traded companies. It would be prudent to understand whether owning stock in a large, diversified corporation that happens to have a small division related to turf aeration would be considered a violation of the agreement.