What condition must be met for an Engel & Volkers franchisee to own stock in a competitive business?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
- 23.2.5 not to enter into competition during the Term with the ENGEL & VÖLKERS System, either directly or indirectly, in an employed or a self-employed capacity, for its own account or for the account of a third party for the duration of this Agreement, provided always that the Principal is entitled to acquire shares in stock exchange-listed companies during the course of normal investment activity up to an amount of not more than twenty-five percent (25%) of the share capital of such companies.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, a Principal of an Engel & Volkers franchise, defined as an owner with at least a 10% stake, is generally prohibited from competing with the Engel & Volkers system during the term of the agreement. This restriction extends to involvement in any capacity, whether as an employee, self-employed individual, proprietor, partner, investor, or shareholder.
However, there is an exception to this non-compete clause. A Principal is permitted to acquire shares in publicly traded companies that may be considered competitive to Engel & Volkers. This is allowed only if the Principal's ownership does not exceed 25% of the share capital of such companies. This exception acknowledges the common practice of individuals holding diversified investment portfolios, even if some holdings may have indirect competitive overlaps.
This condition provides some flexibility for the Principals of Engel & Volkers franchises to invest in publicly traded companies, even those that might be considered competitors, without violating the franchise agreement, as long as the ownership stake remains below the 25% threshold. This ensures that their investment activities do not pose a significant competitive threat or conflict of interest with their Engel & Volkers franchise.