What is the Floyds 99 Developer required to do regarding restrictive covenants after the termination or expiration of the Development Agreement?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
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. Developer and its officers, directors, shareholders, Principal Managers, members, managers and/or partners acknowledge that they possess skills and abilities of a general nature and have other opportunities for exploiting such skills.
Consequently, enforcement of the covenants made in this Section will not deprive them of their personal goodwill or ability to earn a living.
Source: Item 23 — RECEIPT (FDD pages 58–229)
What This Means (2025 FDD)
According to the 2025 Floyds 99 Franchise Disclosure Document, after the termination or expiration of the Development Agreement, the Developer must adhere to all restrictive covenants outlined in the agreement. Specifically, for a period of two years following the termination or expiration date (or the date business ceases, if later), the Developer, along with its officers, directors, shareholders, Principal Managers, members, managers, and partners, cannot have any direct or indirect interest in a Competitive Business. This restriction applies 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.
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 permitted to own 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.
Floyds 99 emphasizes that these restrictions will not deprive the Developer of their general skills or ability to earn a living, as they possess skills and abilities of a general nature and have other opportunities for exploiting such skills. This suggests that while the non-compete is in place, the Developer is still expected to be able to pursue other business ventures outside of the restricted scope. This clause aims to protect Floyds 99's market and proprietary information while acknowledging the Developer's right to make a living.
Prospective developers should carefully review Section 11.1 and 11.2 of the Development Agreement to fully understand the scope and limitations of these restrictive covenants. Understanding these post-termination obligations is crucial for planning future business activities after the Development Agreement concludes.