After termination of the Floyds 99 agreement, for how long is the developer restricted from engaging in a Competitive Business?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
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. 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, if the Development Agreement is terminated or expires, the developer is restricted from involvement with a Competitive Business for two years. This restriction applies to the developer, their officers, directors, shareholders, Principal Managers, members, managers, and partners. The two-year period starts from the termination or expiration date, or the date the developer stops conducting business, whichever is later.
The restriction prevents these individuals from having any direct or indirect interest in a Competitive Business 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 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 hair care products.
This non-compete clause does not prohibit owning 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. Floyds 99 emphasizes that the individuals involved possess general skills and abilities and have other opportunities to earn a living, so enforcing these covenants will not deprive them of their personal goodwill or ability to earn a living. This is a fairly standard non-compete clause in franchising, designed to protect the brand and its franchisees from unfair competition from former developers who have gained knowledge of the Floyds 99 system.