Why does Fly Fitness require a Confidentiality and Non-Compete Agreement from the Covenantor?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
WHEREAS, in connection with his or her duties, it will be necessary for Covenantor to have access to some or all of the confidential information, knowledge, know-how, techniques, contents of the Fly Fitness operations manual and other materials used in or related to the System and/or concerning the methods of operation of the System (collectively referred to as "Confidential Information").
WHEREAS, the Confidential Information provides economic advantages to Franchisor and licensed users of the System, including Franchisee;
WHEREAS, Franchisee has acknowledged the importance of restricting the use, access and dissemination of the Confidential Information, and Franchisee therefore has agreed to obtain from Covenantor a written agreement protecting the Confidential Information and further protecting the System against unfair competition; and
WHEREAS, Covenantor acknowledges that receipt of and the right to use the Confidential Information constitutes independent valuable consideration for the representations, promises and covenants made by Covenantor herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, the parties agree as follows:
1. Confidentiality Agreement.
- a. Covenantor shall, at all times, maintain the confidentiality of the Confidential Information and shall use such Confidential Information only in the course of his or her employment by or association with Franchisee in connection with the operation of a Franchised Business under the Franchise Agreement.
- b. Covenantor shall not at any time make copies of any documents or compilations containing some or all of the Confidential Information without Franchisor's express written permission.
- c. Covenantor shall not at any time disclose or permit the disclosure of the Confidential Information except, and only then to the limited extent necessary, to those employees of Franchisee for training and assisting such employees in the operation of the Franchised Business.
- d. Covenantor shall surrender any material containing some or all of the Confidential Information to Franchisee or Franchisor, upon request, or upon termination of employment or association with Franchisee.
- e. Covenantor shall not at any time, directly or indirectly, do any act or omit to do any act that would or would likely be injurious or prejudicial to the goodwill associated with the System.
- f. Covenantor agrees that no Confidential Information may be reproduced, in whole or in part, without written consent.
2. Covenants Not to Compete.
a. In order to protect the goodwill and unique qualities of the System, and in consideration for the disclosure to Covenantor of the Confidential Information, Covenantor further agrees and covenants that during Covenantor's employment or association with Franchisee, Covenantor shall not, for Covenantor or through, on behalf of or in conjunction with any person or entity:
(i) divert, or attempt to divert, any business or customer of the Fly Fitness outlet or of other franchisees in the System to any competitor, by direct or indirect inducement or otherwise, and/or
(ii) participate as an owner, partner, director, officer, employee, consultant, or agent or serve in any other capacity in any fitness or personal trainer business substantially similar to the System.
b. In further consideration for the disclosure to Covenantor of the Confidential Information and to protect the goodwill and unique qualities of the System, Covenantor further agrees and covenants that, upon the termination of Covenantor's employment or association with Franchisee and continuing for twenty-four (24) months thereafter, Covenantor shall not, for Covenantor or through, on behalf of or in conjunction with any person or entity:
(i) divert, or attempt to divert, any business or customer of the Franchised Business or of other franchisees in the Fly Fitness System to any competitor, by direct or indirect inducement or otherwise, and/or
(ii) participate as an owner, partner, director, officer, employee, or consultant or serve in any other managerial, operational, or supervisory capacity in any fitness or personal trainer within the within ten (10) miles of Franchisee's Territory or any Fly Fitness location.
c. The parties acknowledge and agree that each of the covenants contained herein are reasonable limitations as to time, geographical area, and scope of activity to be restrained and do not impose a greater restraint than is necessary to protect the goodwill or other business interests of Franchisor.
d. If the period of time or the geographic scope specified Section 2.b. above, should be adjudged unreasonable in any proceeding, then the period of time will be reduced by such number of months or the geographic scope will be reduced by the elimination of such portion thereof, or both, so that such restrictions may be enforced for such time and scope as are adjudged to be reasonable.
In addition, Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in this Agreement or any portion thereof, without Covenantor's or Franchisee's consent, effective immediately upon receipt by Covenantor of written notice thereof, and Covenantor agrees to forthwith comply with any covenant as so modified.
3. General.
a. Franchisee shall take full responsibility for ensuring that Covenantor acts as required by this Agreement.
- b. Covenantor agrees that in the event of a breach of this Agreement, Franchisor would be irreparably injured and be without an adequate remedy at law.
Therefore, in the event of such a breach, or threatened or attempted breach of any of the provisions hereof, Franchisee is obligated to enforce the provisions of this Agreement and shall be entitled, in addition to any other remedies that are made available to it at law or in equity, to a temporary and/or permanent injunction and a decree for the specific performance of the terms of this Agreement, without the necessity of showing actual or threatened harm and without being required to furnish a bond or other security.
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the Confidentiality and Non-Compete Agreement is required to protect the goodwill, unique qualities, and confidential information of the Fly Fitness system. The agreement ensures that the Covenantor, who has access to confidential information such as the operations manual and methods of operation, does not disclose or misuse this information. This is crucial because the confidential information provides economic advantages to Fly Fitness and its franchisees. The franchisee acknowledges the importance of restricting the use, access, and dissemination of confidential information and agrees to obtain a written agreement from the Covenantor to protect this information and the system against unfair competition. The Covenantor's receipt and right to use the confidential information is considered valuable consideration for the promises made in the agreement.
The agreement specifically prevents the Covenantor from engaging in activities that could harm the Fly Fitness system. This includes refraining from any action that would be injurious or prejudicial to the goodwill associated with the system and ensuring that no confidential information is reproduced without written consent. The non-compete covenants prevent the Covenantor from diverting business or customers to competitors and from participating in any similar fitness or personal trainer business during their association with the franchisee.
Post-termination, the non-compete restrictions continue for 24 months, preventing the Covenantor from engaging in similar activities within ten miles of the franchisee's territory or any Fly Fitness location. These restrictions are designed to protect Fly Fitness from unfair competition by individuals who have gained knowledge of its confidential information and operational methods. Fly Fitness states that the covenants are reasonable in terms of time, geographical area, and scope of activity, ensuring they do not impose a greater restraint than necessary to protect the brand's goodwill and business interests. Franchisees are responsible for ensuring their employees (Covenantors) comply with the agreement.
Fly Fitness also retains the right to modify the scope of any covenant in the agreement without the Covenantor's or franchisee's consent, with immediate effect upon written notice to the Covenantor. In the event of a breach of the agreement, Fly Fitness would be irreparably injured and without an adequate remedy at law, entitling Fly Fitness to injunctive relief and specific performance of the agreement's terms, without needing to show actual harm or provide a bond.