Is the Developer prohibited from operating a business similar to Floyds 99 outside of the Development Area?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
11.2 Post-Termination Covenant Not to Compete. Upon termination or expiration of this Agreement for any reason, Developer and its officers, directors, shareholders, Principal Managers, members, managers and/or partners agree that, for a period of two years commencing on the effective date of termination or expiration, or the date on which Developer ceases to conduct business, whichever is later, neither Developer nor its officers, directors, shareholders, Principal Managers, members, managers and/or partners shall have any direct or indirect interest (through a member of any immediate family of Developer or its owners or otherwise) as a disclosed or beneficial owner, investor, partner, director, officer, manager, employee, consultant, representative or agent or in any other capacity in any Competitive Business, defined in Section 11.1 above, located or operating within a 25 mile radius of the Franchised Location described in Developer's Franchise Agreements, within 25 miles of the Franchised Location of any other franchised FLOYD'S 99 Shop or, within 25 miles of the premises of any FLOYD'S 99 Shop owned by Franchisor or any affiliate of Franchisor. The restrictions of this Section shall not be applicable to the ownership of shares of a class of securities listed on a stock exchange or traded on the over-the-counter market that represent 5% or less of the number of shares of that class of securities issued and outstanding.
Source: Item 23 — RECEIPT (FDD pages 58–229)
What This Means (2025 FDD)
According to Floyds 99's 2025 Franchise Disclosure Document, during the term of the Development Agreement, the developer is restricted from involvement in a "Competitive Business." A Competitive Business is defined as any business operating or franchising 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 hair care product sales. However, the developer is not prohibited from owning less than 5% of securities in a Competitive Business if the securities are publicly traded. These restrictions apply to the developer, their officers, directors, shareholders, Principal Managers, Barbershop managers, equity owners, members, managers, partners, and their immediate families.
Following the termination or expiration of the Development Agreement, the developer is subject to a post-termination covenant not to compete for two years. This prevents the developer and its associated parties from having any direct or indirect interest in a Competitive Business within a 25-mile radius of the franchised location described in the Developer's Franchise Agreements, any other franchised Floyds 99 Shop, or any Floyds 99 Shop owned by the franchisor or its affiliates. Similar to the restriction during the agreement, owning 5% or less of publicly traded securities in a Competitive Business is permitted.
These restrictive covenants ensure that the developer cannot directly compete with Floyds 99 during the term of the agreement or for a limited time after its termination within specified geographic areas. This protects Floyds 99's business interests, trade secrets, and customer base. Prospective developers should carefully consider these restrictions and their potential impact on their business activities before entering into a Development Agreement with Floyds 99.