During the term of the Floyds 99 Franchise Agreement, can an Associate have a controlling interest in a Competitive Business?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
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;
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 Franchise Disclosure Document, during the term of the agreement, an Associate is restricted from having a direct or indirect controlling interest in a Competitive Business. A Competitive Business is defined as any business operating or franchising retail hair care services that derives 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.
This restriction extends not only to the Developer (franchisee) but also to their officers, directors, shareholders, Principal Managers, Barbershop managers, equity owners, members, managers, partners, and their immediate families. This means that these individuals cannot have a controlling interest in a competing hair care business during the term of their Floyds 99 franchise agreement.
However, there is an exception: the Developer is not prohibited from owning 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. This allows for minor investments in publicly traded competing companies without violating the franchise agreement. This non-compete clause ensures that the franchisee and related parties remain committed to the success of their Floyds 99 franchise and do not directly compete with the brand during the agreement term.