Does the Floyds 99 non-compete agreement apply to equity owners of the developer?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
eveloper has entered into with Franchisor or one of Franchisor's affiliates.
11. RESTRICTIVE COVENANTS
- 11.1 Non-Competition During Term. 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.
11.2 Post-Termination Covenant Not to Compete.
Source: Item 23 — RECEIPT (FDD pages 58–229)
What This Means (2025 FDD)
According to the 2025 Floyds 99 Franchise Disclosure Document, the non-compete agreement applies to equity owners of the developer. Specifically, during the term of the Development Agreement, neither the Developer nor any of the Developer's officers, directors, shareholders, Principal Managers, Barbershop managers, equity owners, members, managers or partners, nor any member of his or their immediate families, can have a direct or indirect controlling interest in a Competitive Business, perform services for a Competitive Business, or divert business or employees to a Competitive Business.
Following the termination or expiration of the Development Agreement, the non-compete extends for two years. During this period, neither the Developer nor its officers, directors, shareholders, Principal Managers, members, managers and/or partners can have any direct or indirect interest in a Competitive Business within a 25-mile radius of the Franchised Location, any other franchised Floyds 99 Shop, or any Floyds 99 Shop owned by the Franchisor or its affiliates.
There are exceptions to these restrictions. Ownership of securities in a Competitive Business is permitted if the securities are listed on a stock exchange or traded over-the-counter and represent 5% or less of the outstanding securities. This means that while active involvement or significant ownership in a competing business is prohibited, a passive, minor investment in a publicly traded competitor is allowed. This post-termination covenant acknowledges that the individuals involved possess general skills and have other opportunities for earning a living, suggesting that the restrictions are designed to protect Floyds 99's interests without unduly limiting the individual's ability to work.