Are there exceptions to the post-termination non-compete for Floyds 99 franchisees regarding ownership of publicly traded stock?

According to the 2025 Floyds 99 Franchise Disclosure Document, there are exceptions to the post-termination non-compete agreement regarding the ownership of publicly traded stock. The standard post-termination covenant restricts franchisees from having any direct or indirect interest in a Competitive Business within a specified radius for two years after termination or expiration of the franchise agreement. A Competitive Business is defined as 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.

However, this restriction does not apply to the ownership of shares of a class of securities listed on a stock exchange or traded on the over-the-counter market. This exception is valid as long as the shares represent 5% or less of the number of shares of that class of securities issued and outstanding. This means a franchisee can invest in a publicly traded competitor, provided their ownership stake remains below this threshold.

This exception provides franchisees with some flexibility in their investment options post-termination. It allows them to diversify their portfolio without necessarily violating the non-compete agreement, as long as the ownership stake in a competing business is minimal. This is a fairly standard exception in franchise agreements, as it acknowledges that franchisees should not be unduly restricted from participating in the stock market.

For a prospective Floyds 99 franchisee, this clause offers a degree of financial freedom after leaving the system. They can invest in publicly traded companies in the hair care industry, as long as they keep their ownership below the 5% threshold. It is important for franchisees to carefully monitor their investments to ensure compliance with this restriction, as exceeding the limit could be considered a breach of the post-termination covenant.