After termination of the Floyds 99 agreement, does the non-compete apply to the franchisee's immediate family members?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
ir 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. Upon termination or expiration of this Agreement for any reason, the Franchisee 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 the Franchisee ceases to conduct business, whichever is later, neither Franchisee 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 the Franchisee 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 22.1 above, located or operating within a 25 mile radius of the Franchised Location, 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 the Franchisor or affiliate of the 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.
Source: Item 22 — CONTRACTS (FDD pages 57–58)
What This Means (2025 FDD)
According to the 2025 Floyds 99 Franchise Disclosure Document, the post-termination covenant not to compete does extend to the franchisee's immediate family members under certain conditions. Specifically, the franchisee and its officers, directors, shareholders, Principal Managers, members, managers and/or partners are restricted from having any direct or indirect interest (through a member of any immediate family of the Franchisee or its owners or otherwise) in a Competitive Business. This restriction applies for a period of two years after termination or expiration of the agreement.
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. The non-compete applies within a 25-mile radius of the franchised Floyds 99 location, any other franchised Floyds 99 shop, or any Floyds 99 shop owned by the franchisor or its affiliates.
This means that after the franchise agreement ends, a franchisee's immediate family members cannot have a direct or indirect interest in a competing hair care business within the specified geographic area for two years. However, there is an exception: family members are not 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. This provision aims to prevent franchisees and their families from circumventing the non-compete agreement by operating competing businesses through family members.
Prospective franchisees should carefully consider the implications of this non-compete clause, especially if family members are involved in or may become involved in similar businesses. It is important to understand the definition of "Competitive Business" and the geographic limitations to assess the potential impact on family members' business activities after the termination or expiration of the Floyds 99 franchise agreement.