Does the Floyds 99 non-compete agreement prevent a franchisee from diverting clients to a Competitive Business?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
e of the Marks hereunder, the 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 the franchisees of the Franchisor using the Marks and Licensed Methods. Therefore, other than the FLOYD'S 99 Shop licensed herein or authorized by separate agreement with the Franchisor, neither the Franchisee nor any of the Franchisee'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 the FLOYD'S 99 Shop, the Franchisor's business or any other FLOYD'S 99 franchisee's business, by direct inducement or otherwise, or divert or attempt to divert the employment of any employee of the Franchisor or another franchisee licensed by the Franchisor to use the Marks and Licensed Methods, to any Competitive Business by any direct inducement or otherwise.
- d. 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, the Franchisee 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-thecounter market and represent 5% or less of that class of securities issued and outstanding.
- 22.2 Post-Termination Covenant Not to Compete.
Source: Item 22 — CONTRACTS (FDD pages 57–58)
What This Means (2025 FDD)
According to Floyds 99's 2025 Franchise Disclosure Document, the non-compete agreement does address the diversion of clients. During the term of the Franchise Agreement, a franchisee is prohibited from diverting or attempting to divert any business related to, or any client or account of the Floyds 99 Shop to a Competitive Business. This restriction applies to the franchisee, their officers, directors, shareholders, principal managers, barbershop managers, equity owners, members, managers, partners, and their immediate families.
A "Competitive Business" is defined as any business operating or granting franchises or licenses to 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. However, franchisees are allowed to own securities in a Competitive Business if the securities are listed on a stock exchange or traded over-the-counter and represent 5% or less of the outstanding securities.
Post-termination, for a period of two years, the franchisee is restricted from having 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. Similar to the agreement during the term, this post-termination restriction does not apply to 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. This comprehensive non-compete aims to protect Floyds 99's market share and proprietary information both during and after the franchise agreement.