If a Dryject franchisee has an interest in a business that sells similar services within their designated territory, is this a breach of contract?
Dryject Franchise · 2025 FDDAnswer from 2025 FDD Document
(a) Directly or indirectly, for himself 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
(b) Divert or attempt to divert, directly or indirectly, any business, business opportunity or customer of Franchisee's Business(s) to any competitor.
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Except to the extent prohibited by the laws of the state where the Franchised Business is located or where the Trainee lives or works, in further consideration for the disclosure to Trainee of Franchisor's Trade Secrets and to protect the uniqueness of DRYJECT SYSTEM, Trainee agrees that for two (2) years following the termination of Trainee's employment with Franchisee, Trainee will not without the prior written consent of Franchisor, divert or attempt to divert, directly or indirectly, any business, business opportunity or customer of Franchisee's Franchised Business(s) to any competitor.
Franchisee undertakes to use Franchisee's best efforts to ensure that Trainee acts as required by this Agreement.
Source: Item 8 — BUSINESS RELATIONSHIP (FDD pages 68–229)
What This Means (2025 FDD)
According to the 2025 Dryject Franchise Disclosure Document, a franchisee having a financial interest in a similar business within the United States could be a breach of contract. Specifically, the FDD states that a franchisee cannot "directly or indirectly, for himself 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".
This restriction applies to any business that is the same as or similar to Dryject, regardless of whether the franchisee is actively involved in its operation. The key factor is the financial or beneficial interest. This clause aims to prevent franchisees from diverting business opportunities or customers to a competing entity, thereby protecting Dryject's market position and the interests of other franchisees.
Furthermore, this restriction extends not only to the franchisee but also to a trainee. For two years after the trainee's employment ends, the trainee cannot "divert or attempt to divert, directly or indirectly, any business, business opportunity or customer of Franchisee's Franchised Business(s) to any competitor." The franchisee is responsible for ensuring the trainee adheres to this agreement.
It is important to note that these restrictions may be subject to the laws of the state where the franchised business is located, meaning that certain state laws could prohibit or modify the enforcement of these covenants. A prospective franchisee should consult with a legal professional to understand the specific implications of these restrictions in their state.