Can an Associate of a Floyds 99 franchise divert the employment of any employee of another franchisee to any Competitive Business?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
- (c) divert or attempt to divert any business related to, or any client or account of any FLOYD'S 99 Shop, Franchisor's business or any other FLOYD'S 99 Developer's business, by direct inducement or otherwise, or divert or attempt to divert the employment of any employee of Franchisor, another developer or another franchisee licensed by Franchisor to use the Marks and Licensed Methods, to any Competitive Business by any direct inducement or otherwise.
The term "Competitive Business" as used in this Agreement shall mean any business operating or granting franchises or licenses to others to operate, either (i) a retail hair care business deriving more than 5% of its gross sales from the sale of haircuts or hair care products; or (ii) a wholesale business deriving more than 5% of its gross sales from the sale of hair care products. Notwithstanding the foregoing, Developer shall not be prohibited from owning securities in a Competitive Business if such securities are listed on a stock exchange or traded on the over-the-counter market and represent 5% or less of that class of securities issued and outstanding.
Source: Item 23 — RECEIPT (FDD pages 58–229)
What This Means (2025 FDD)
According to the 2025 Floyds 99 Franchise Disclosure Document, a franchisee is restricted from diverting the employment of any employee of Franchisor, another developer, or another franchisee licensed by Franchisor to use the Marks and Licensed Methods, to any Competitive Business by any direct inducement or otherwise. This restriction is in place during the term of the agreement.
This means that during the term of the Franchise Agreement, a Floyds 99 franchisee (or their officers, directors, shareholders, Principal Managers, Barbershop managers, equity owners, members, managers or partners, nor any member of his or their immediate families) cannot actively try to hire away employees from Floyds 99 itself, from other developers, or from other franchisees to work at a competing business. A "Competitive Business" is defined as any business operating or granting franchises or licenses to others to operate, either (i) a retail hair care business deriving more than 5% of its gross sales from the sale of haircuts or hair care products; or (ii) a wholesale business deriving more than 5% of its gross sales from the sale of hair care products.
This restriction aims to protect the Floyds 99 system by preventing franchisees from poaching talent and potentially using the knowledge and skills gained within the Floyds 99 system to benefit a competitor. This type of clause is common in franchise agreements to maintain stability and prevent unfair competition within the franchise network. However, the franchisee is not prohibited from owning securities in a Competitive Business if such securities are listed on a stock exchange or traded on the over-the-counter market and represent 5% or less of that class of securities issued and outstanding.
It is important to note that this restriction applies during the term of the Franchise Agreement. A separate post-termination covenant not to compete also exists, which further restricts involvement with a Competitive Business for a period of two years after the agreement's termination or expiration within a specified radius.