What constitutes a 'Competitive Business' for Floyds 99 franchisees during the term of the agreement?

According to Floyds 99's 2025 Franchise Disclosure Document, a 'Competitive Business' is defined in Section 22.1 of the franchise agreement. During the term of the agreement, franchisees and related parties are restricted from having a direct or indirect controlling interest in such a business, performing services for one, or diverting business or employees to one, other than the licensed Floyds 99 shop. This restriction applies to the franchisee, their officers, directors, shareholders, principal managers, barbershop managers, equity owners, members, managers, partners, and their immediate families.

Specifically, a 'Competitive Business' is defined as any business that operates or franchises/licenses others to operate either a retail hair care business deriving more than 5% of its gross sales from haircuts or hair care products, or a wholesale business deriving more than 5% of its gross sales from the sale of hair care products. This definition is crucial for prospective franchisees to understand, as it dictates what other business ventures they (and their close associates) can be involved in during the franchise term without violating the agreement.

However, there is an exception: franchisees are not prohibited from owning securities in a Competitive Business if those securities are listed on a stock exchange or traded over-the-counter, and represent 5% or less of the outstanding securities of that class. This allows for minor investments in publicly traded companies that might technically be considered 'Competitive Businesses' without violating the non-compete clause. This exception is fairly standard in franchising, as it allows franchisees to diversify their investments without completely restricting them from the broader market.

This definition and the associated restrictions are designed to protect Floyds 99's market position, trade secrets, and customer base. By preventing franchisees from engaging in competitive ventures, Floyds 99 aims to maintain the integrity and uniformity of its brand and services across all franchise locations. Prospective franchisees should carefully consider these restrictions and how they might impact their other business interests or investment opportunities before entering into a franchise agreement with Floyds 99.