After termination of the Floyds 99 agreement, can a developer's family member have an interest in a Competitive Business within the restricted radius?
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 Floyds 99's 2025 Franchise Disclosure Document, after the termination or expiration of the agreement, neither the Developer nor their officers, directors, shareholders, Principal Managers, members, managers, or partners can have a direct or indirect interest in a Competitive Business within a specified radius. This restriction extends to members of their immediate families. This means that a developer's family member is also restricted from having an interest in a Competitive Business.
The restriction applies for two years, starting from the termination or expiration date, or the date the Developer stops conducting business, whichever is later. The restricted area is 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 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 products. However, the Developer is allowed 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.
This post-termination covenant aims to protect Floyds 99's market share and proprietary information by preventing former developers and their close associates from directly competing with the franchise within a reasonable timeframe and geographic area. This type of restriction is common in franchising to maintain brand integrity and prevent unfair competition.