Is it permissible for a proposed Floyds 99 transferee to operate a Competitive Business?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — RECEIPT (FDD pages 58–229)
What This Means (2025 FDD)
According to the 2025 Floyds 99 FDD, during the term of the franchise agreement, a developer (franchisee) and their related parties are restricted from having a direct or indirect controlling interest in a "Competitive Business." A Competitive Business is defined as any business operating 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, this restriction applies specifically to the franchisee and related parties during the term of the Franchise Agreement. The FDD excerpts provided do not explicitly address whether a proposed transferee (the buyer of an existing franchise) is permitted to operate a Competitive Business. The document focuses on the restrictions placed on the current franchisee during the agreement and post-termination.
Therefore, it is unclear from the provided excerpts whether a potential buyer already involved in a Competitive Business would be approved as a transferee. A prospective Floyds 99 franchisee should clarify this point with the franchisor, specifically asking about the criteria for transferee approval and whether owning or operating a Competitive Business would disqualify a potential buyer.