Is a Floyds 99 developer prohibited from transferring the agreement to an entity controlled by a competitor?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
Developer acknowledges that, in addition to the training provided pursuant to this Agreement and the Franchise Agreements and the license of the Marks under the Franchise Agreements, Franchisor has also licensed commercially valuable information which comprises and is a part of the Licensed Methods, including without limitation, operations, proprietary products, proprietary product formulas, vendor lists, marketing, advertising and related information and materials and that the value of this information derives not only from the time, effort and money which went into its compilation, but from the usage of the same by all Developers and franchisees of Franchisor using the Marks and Licensed Methods. Therefore, other than the FLOYD'S 99 Shop(s) authorized by separate agreement(s) with Franchisor, neither Developer nor any of Developer's officers, directors, shareholders, Principal Managers, Barbershop managers, equity owners, members, managers or partners, nor any member of his or their immediate families, shall during the term of this Agreement:
- (a) have any direct or indirect controlling interest as a disclosed or beneficial owner in a "Competitive Business" as defined below;
- (b) perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for a Competitive Business; or
- (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 Floyds 99's 2025 Franchise Disclosure Document, a developer's ability to transfer their rights under the agreement is subject to certain restrictions, including Floyds 99's right of first refusal. Specifically, Floyds 99 maintains the right to approve or disapprove any proposed sale or transfer.
Floyds 99 has the right to disapprove a proposed transfer to a competitor because of the non-compete clause outlined in section 11.1. This clause states that during the term of the agreement, the developer cannot have any direct or indirect controlling interest in a "Competitive Business". A Competitive Business is defined as any business operating or granting franchises or licenses to others to operate 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.
Therefore, while the FDD doesn't explicitly state that a transfer to a competitor is prohibited, the non-compete clause and Floyds 99's right to approve or disapprove transfers effectively prevent a developer from transferring the agreement to an entity controlled by a competitor. This is a fairly standard practice in franchising, designed to protect the brand and confidential information.