What is the scope of the confidentiality obligations for Fitstop franchisees regarding the 'Confidential Information'?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
During the term of the Franchise Agreement, you will receive information which we consider trade secrets and confidential information. You may not, during the term of the Franchise Agreement or any time after that, communicate, divulge, or use for the benefit of any other person, partnership, association, corporation, or limited liability company any of these trade secrets, copyrighted materials, methods and other techniques and know-how concerning the operation of the Franchised Business (the "Confidential Information"). You may divulge such Confidential Information only to your employees who must have access to it in order to fulfil their employment obligations.
You must require your Designated Manager and any personnel having access to any of our Confidential Information to sign our then-current form of Confidentiality and Non-Competition Agreement set forth in our then-current Manuals or form of franchise agreement, where these individuals agree that they will maintain the confidentiality of information they receive in connection with their employment and restrict their right to work for a competitor while they are employed by you. This confidentiality agreement, which will be in a form that we prescribe, will identify us as a third-party beneficiary to the agreement and will give us independent enforcement rights.
Source: Item 14 — PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION (FDD pages 38–40)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, franchisees have extensive confidentiality obligations regarding trade secrets, copyrighted materials, methods, and know-how related to the operation of the franchised business. This obligation extends both during the term of the Franchise Agreement and indefinitely after its termination. Franchisees are prohibited from communicating, divulging, or using this "Confidential Information" for the benefit of any other person or entity. The definition of Confidential Information includes all confidential information and know-how relating to the administration and operation of a Fitstop franchised businesses including all systems, processes, procedures, software, databases, logos, manuals, advertising information and promotional materials. It also includes telephone and facsimile numbers, email addresses and internet domain names, trade names, trademarks, reputation, know-how, techniques, systems and procedures, business plans, Customer Information, information technology process, hardware or programs and any computer software (including mobile applications) developed by or for the Franchisor. Any works, marks, symbols, ideas, logos, trade secrets, and other creations which are developed by the Franchisee or other Franchisees from use of the Intellectual Property or otherwise during the operation of the Franchised Business are also considered confidential.
Fitstop franchisees are permitted to share Confidential Information only with their employees who need access to it to fulfill their job duties. However, franchisees must ensure that these employees sign a confidentiality and non-competition agreement. This agreement, in a form prescribed by Fitstop, requires employees to maintain the confidentiality of the information they receive and restricts their ability to work for a competitor during their employment. Fitstop is identified as a third-party beneficiary in this agreement, giving them independent enforcement rights against the franchisee's employees.
These confidentiality obligations are typical in franchising, as franchisors need to protect their proprietary systems and methods. The broad scope of the definition of "Confidential Information" in the Fitstop franchise agreement means that franchisees must be extremely careful about how they handle any information related to the Fitstop business. The requirement to have employees sign confidentiality agreements is also standard practice, providing an additional layer of protection for Fitstop's intellectual property. Prospective franchisees should carefully review the form of the Confidentiality and Non-Competition Agreement to understand the specific restrictions placed on their employees.