What are the terms of the non-competition covenant after the Floyds 99 franchise is terminated or expires?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Franchise Agreement | Summary | |
|---|---|---|---|
| a. | Length of the franchise term | Section 19.1 | 10 years |
| b. | Renewal or extension of the | Sections 19.3 and | Term in then-current Franchise |
| term | 19.4 | Agreement. | |
| c. | Requirements for franchisee to renew or extend | Section 19.3 | Remodel, pay fee, sign new agreement and release. You may be asked to sign a contract with materially different terms and conditions than your original contract if you choose to renew. |
| d. | Termination by franchisee | Not Applicable | Not Applicable |
| e. | Termination by franchisor without cause | Not Applicable | Not Applicable |
| f. | Termination by franchisor with | Sections 20.1 and | We can terminate only if you commit |
| cause | 20.2 | any one of several listed violations. | |
| g. | “Cause” defined – curable | Sections 20.1 and | 30 days for operational defaults, 10 |
| defaults | 20.2 | days for monetary defaults. | |
| h. | “Cause” defined – non-curable defaults | Section 20.1 | Unauthorized disclosure, conviction of a crime, abandonment, unapproved transfers, bankruptcy, assignment for benefit of creditors, unsatisfied judgments, levy, foreclosure, repeated violations, misuse of Marks. |
| i. | Franchisee’s obligations on termination / nonrenewal | Section 20.4 | Pay outstanding amounts, de- identification of the Barbershop, return of confidential information, covenant not to compete (see also r. below). |
| j. | Assignment of contract by franchisor | Section 18.6 | No restriction on our right to assign. |
| k. | “Transfer” by franchisee – definition | Section 18.1 | Includes transfer of Franchise Agreement or of the Barbershop or its |
| Provision | Section in Development Agreement | Summary Agreement or other agreements, notice of termination of Franchise Agreement delivered to Developer by Franchisor or Developer terminates a Franchise Agreement without cause. | |
| i. | Franchisee’s obligations on termination / nonrenewal | Section 9.3 | Loss of development rights, cease use of Marks and confidential information except in connection with Barbershops currently operating; covenant not to compete. |
| j. | Assignment of contract by franchisor | Section 8.6 | No restriction on our right to assign. |
| k. | “Transfer” by franchisee – definition | Sections 8.1 and 8.5 | Includes transfer of interest in Development Agreement, or in the franchisee entity. |
| l. | Franchisor’s approval of transfer by franchisee | Section 8.3 | We or our designee have the right to approve all transfers. |
| m. | Conditions for franchisor approval of transfer | Sections 8.2 and 8.3 | Notice, transferee qualifies, all amounts due are paid in full, payment of transfer fee, then current contract signed, franchisee signs general release and noncompetition covenant. |
| n. | Franchisor’s right of first refusal to acquire franchisee’s business | Section 8.4 | We can match any offer. |
| o. | Franchisor’s option to purchase franchisee’s business | Not Applicable | Not Applicable |
| p. | Death or disability of franchisee | Section 8.7 | Interest in Development Agreement must be assigned to approved assignee within 12 months of death and within 6 months of disability. |
| q. | Non-competition covenants during the term of the franchise | Section 11.1 | No involvement in competing business and no diversion. |
| r. | Non-competition covenants after the franchise is terminated or expires | Section 11.2 | No competing business for 2 years within 25 miles of your FLOYD’S 99 Shops or any other FLOYD’S 99 Shop. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 44–49)
What This Means (2025 FDD)
According to Floyds 99's 2025 Franchise Disclosure Document, a franchisee is subject to a non-competition covenant if the franchise is terminated or expires. Specifically, the franchisee is prohibited from engaging in any competing business for a period of 2 years. This restriction applies within a 25-mile radius of the franchisee's former Floyds 99 shop, as well as any other Floyds 99 location.
This non-compete agreement is fairly standard in the franchise industry. The purpose is to protect Floyds 99's market share, customer base, and confidential business information. By preventing a former franchisee from immediately opening a competing business nearby, Floyds 99 aims to maintain a competitive advantage and prevent the franchisee from using their knowledge of Floyds 99's operations to unfairly compete.
For a prospective franchisee, it's crucial to understand the implications of this non-compete clause. Before investing in a Floyds 99 franchise, candidates should carefully consider whether they are willing to be restricted from operating a similar business within the specified area and timeframe after the franchise agreement ends. Franchisees should also consider how this might affect their future career options if they decide to leave the Floyds 99 system.
It is important to note that the enforceability of non-compete agreements can vary by state. While the Floyds 99 agreement specifies Colorado law, a franchisee's local jurisdiction may have different regulations regarding the scope and enforceability of such covenants. Therefore, prospective franchisees should seek legal advice to fully understand their rights and obligations under the non-compete agreement in their specific location.