Can an Engel & Volkers recipient engage in other business activities, and if so, what conditions apply?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Recipient hereby undertakes not to provide residential real estate brokerage services competing with the Engel & Völkers System during the Term of this Agreement (which means the term of Recipient's employment by, ownership participation in, association with or service to Franchisee), either directly or indirectly, in an employed or a self-employed capacity, for its own account or for the account of a third party. Recipient may engage in other business activities that do not involve other competitive real estate agency services. However, all these activities must be conducted under 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.
In addition, during the time periods described above, Recipient agrees not to divert any business that should be handled by Franchisee and its franchised Residential Real Estate Brokerage to any other person or entity. It is the intention of these provisions to preclude not only direct competition but also all forms of indirect competition, such as consultation for competitive businesses, service as an independent contractor for competitive businesses, or any assistance or transmission of information of any kind which would be of any assistance to a competitor. Nothing herein will prevent Recipient from owning for investment purposes up to an aggregate of 5% of the capital stock of any competitive business, so long as the competitive business is a publicly held corporation whose stock is listed and traded on a national or regional stock exchange, or through the National Association of Securities Dealers Automated Quotation System (NASDAQ), and so long as Recipient or Franchisee do not control the company in question.
Source: Item 22 — CONTRACTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers's 2025 Franchise Disclosure Document, a recipient, which refers to an employee, owner, or service provider of the franchisee, can engage in other business activities under specific conditions. The recipient cannot provide residential real estate brokerage services that compete with the Engel & Volkers system during the term of their association with the franchisee. This restriction applies whether the recipient is directly or indirectly involved, employed, or self-employed.
However, the recipient may engage in other business activities that do not involve competitive real estate agency services. To do so, these activities must be conducted under a different trade name and in a manner that prevents the public from associating the business with the Engel & Volkers system. The franchisor may also require that these activities be conducted from a separate location if it believes it is necessary to avoid confusion. The recipient is also prohibited from diverting business that should be handled by the franchisee to any other entity.
There is an exception that allows the recipient to own up to 5% of the capital stock of a publicly held competitive business if the stock is listed and traded on a national or regional stock exchange, or through NASDAQ, and if neither the recipient nor the franchisee controls the company. These provisions aim to prevent both direct and indirect competition, including consultation for competitive businesses or providing assistance to competitors. Franchisees should seek clarification from Engel & Volkers regarding specific activities to ensure compliance with these non-compete terms.