In the Engel & Volkers franchise agreement, what is a violation of the non-compete covenants conclusively deemed to be?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
- 20.3.6 commits a breach of the non-competition provisions set forth in Section 16 or one of the Principals commits a breach of the Confidentiality Agreement and Covenant Not To Compete;
16. Non-Competition
16.1 Competition During Term of Agreement: Franchisee hereby agrees not to provide residential or commercial real estate brokerage services, or any component thereof, competing with the ENGEL & VÖLKERS System during the Term (as defined hereinafter), either directly or indirectly, in an employed or a self-employed capacity, for its own account or for the account of a third party, as a proprietor, partner, investor, shareholder, member, director, manager, officer, employee, principal, agent, advisor, consultant, lessor, sublessor or any similar capacity, either from an Approved Location or any other geographic location whatsoever. Moreover, any spouse, domestic partner or immediate family member of any of Franchisee's Principal(s) may not provide residential or commercial real estate brokerage services, or any component thereof, competing with the ENGEL & VÖLKERS System during the Term of this Agreement (as defined hereinafter), either directly or indirectly, in an employed or a self-employed capacity, for its own account or for the account of a third party, as a proprietor, partner, investor, shareholder, member, director, manager, officer, employee, principal, agent, advisor, consultant, lessor, sublessor or any similar capacity, unless such services are outside a seventy five (75) mile radius of any Approved Location of Franchisee. With the prior written approval of Franchisor, Franchisee may engage in other business activities that do not involve other competitive residential or commercial real estate agency services. However, all these activities must be conducted through a separate legal entity and another trade name and in a manner (including from a separate location if Franchisor, in its sole judgment, believes it is necessary) that eliminates the prospect that the public might believe the business is related to the ENGEL & VÖLKERS System in any way. Franchisor reserves the right to establish policies and procedures in the System Documentation about keeping these activities separate from the franchised Business.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to the 2025 Engel & Volkers Franchise Disclosure Document, a breach of the non-competition provisions outlined in Section 16 of the franchise agreement or a breach of the Confidentiality Agreement and Covenant Not To Compete by one of the Principals is considered a default under the agreement. Specifically, section 16.1 states that the franchisee cannot provide residential or commercial real estate brokerage services that compete with the Engel & Volkers system during the term of the agreement. This restriction applies whether the franchisee is directly or indirectly involved, employed, or self-employed, and covers various capacities such as proprietor, partner, investor, shareholder, and more.
This non-compete extends to the franchisee's spouse, domestic partner, or immediate family members of the franchisee's principals, preventing them from engaging in competing real estate brokerage services within a 75-mile radius of any approved Engel & Volkers location. The franchisee may engage in other business activities with prior written approval from Engel & Volkers, provided these activities do not involve competitive residential or commercial real estate agency services. These activities must be conducted through a separate legal entity, under a different trade name, and in a manner that prevents the public from associating the business with the Engel & Volkers system.
For a prospective Engel & Volkers franchisee, this means that they, their principals, and their immediate family members must refrain from engaging in any competing real estate activities during the term of the franchise agreement and within the specified geographic area. Failure to comply with these non-compete provisions constitutes a breach of the franchise agreement, potentially leading to termination or other legal consequences. It is important for franchisees to fully understand and adhere to these restrictions to avoid any conflicts or violations.