Does the Face Foundrie franchise agreement prohibit undisclosed interests in competitive businesses?
Face_Foundrie Franchise · 2025 FDDAnswer from 2025 FDD Document
- 1.03 Representations. Franchisee and its Owners, jointly and severally, represent and warrant to Franchisor that: (a) neither Franchisee nor any of its Owners have made any untrue statement of any material fact or has omitted to state any material fact in the written information submitted in obtaining the rights granted hereunder; (b) neither Franchisee nor any of its Owners have any direct or indirect legal or beneficial interest in any beauty-related business that may be deemed a Competitive Business, except as Franchisee has otherwise completely and accurately disclosed in writing to Franchisor in connection with obtaining the rights granted hereunder; and (c) the execution and performance of this Agreement will not violate any other agreement to which Franchisee or any of its Owners may be bound.
Franchisee recognizes that Franchisor has executed this Agreement in reliance on all of the statements Franchisee and its Owners have made in writing in connection with this Agreement.
- 1.04 Certain Definitions. The terms listed below have the meanings which follow them and include the plural as well as the singular.
Other terms are defined elsewhere in this Agreement in the context in which they arise.
- (a) "Affiliate" Any Person that directly or indirectly owns or controls the referenced party, that is directly or indirectly owned or controlled by the referenced party, or that is under common control with the referenced party.
The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an Entity, whether through ownership of voting securities, by contract or otherwise.
- (b) "Competitive Business" Any business operating or franchising an establishment (i) at which more than 10% of the offerings consists of facial services or beauty treatments for the face, or (ii) that offers waxing services.
Restrictions in this Agreement on competitive activities do not apply to: (i) the ownership or operation of other Face Foundrié Facial Bars that are licensed or franchised by Franchisor or any of its Affiliates; or (b) the ownership of shares of a class of securities that are listed on a public stock exchange or traded on the over-the-counter market and that represent less than five percent (5%) of that class of securities.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2025 FDD)
According to Face Foundrie's 2025 Franchise Disclosure Document, the franchise agreement addresses undisclosed interests in competitive businesses. Franchisees and their owners must represent and warrant that they do not have any direct or indirect legal or beneficial interest in any beauty-related business that may be deemed a Competitive Business, unless they have completely and accurately disclosed such interest in writing to Face Foundrie.
A "Competitive Business" is defined as any business operating or franchising an establishment where more than 10% of the offerings consist of facial services or beauty treatments for the face, or that offers waxing services. This restriction ensures that franchisees are not secretly involved in businesses that directly compete with Face Foundrie, thereby protecting the brand's market position and confidential information.
However, there are exceptions to these restrictions. Franchisees are allowed to own or operate other Face Foundrie Facial Bars that are licensed or franchised by Face Foundrie or its affiliates. Additionally, they can own less than 5% of a class of securities listed on a public stock exchange or traded over-the-counter. This allows franchisees to have minor investments in publicly traded companies, even if those companies have some beauty-related business activities, without violating the franchise agreement. Prospective franchisees should carefully consider these restrictions and disclosure requirements to ensure compliance with the Face Foundrie franchise agreement.