Does the Focalpoint Coaching Nondisclosure and Non-Competition Agreement define what constitutes 'ownership participation in' the Franchisee?
Focalpoint_Coaching Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee therefore agrees that, during this Agreement's term and any renewal term, and unless Franchisor provides prior written consent in its sole discretion, neither Franchisee, any of Franchisee's owners, nor any of Franchisee's or Franchisee's owners' spouses will:
- (a) have any direct or indirect controlling or non-controlling interest as an owner – whether of record, beneficially, or otherwise – in a Competitive Business, wherever located or operating (except that equity ownership of less than two percent (2%) of a Competitive Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange will not be deemed to violate this subparagraph);
- (b) perform services as a director, officer, manager, employee, consultant, representative, or agent for a Competitive Business, wherever located or operating;
- (c) divert or attempt to divert any actual or potential business or client of the Franchised Business or any FocalPoint Franchised Business to a Competitive Business; or
- (d) engage in any other activity which, in Franchisor's sole opinion, might injure the goodwill of the Marks or Franchise System.
The term "Competitive Business" means (i) any business which derives more than twenty percent (20%) of its revenue from selling business training or business consulting services and/or selling products similar to the Proprietary Products or (ii) any business granting franchises or licenses to others to operate the type of business specified in subparagraph (i) (other than a FocalPoint Franchised Business operated under a franchise agreement with Franchisor).
Franchisee agrees to obtain similar covenants from the personnel Franchisor specifies, including officers, directors, managers, Associates and other employees attending Franchisor's training program or having access to Confidential Information. Franchisor has the right to regulate the form of agreement that Franchisee uses and to be a third party beneficiary of that agreement with independent enforcement rights.
Source: Item 22 — Contracts (FDD pages 56–57)
What This Means (2025 FDD)
According to the 2025 Focalpoint Coaching Franchise Disclosure Document, the Nondisclosure and Non-Competition Agreement addresses 'ownership participation' in the context of restrictions on competitive businesses. It states that during the agreement's term, the franchisee, its owners, and their spouses are restricted from having a direct or indirect controlling or non-controlling interest as an owner in a Competitive Business.
Specifically, the agreement prohibits franchisees from having any ownership interest in a Competitive Business, whether it's a recorded, beneficial, or other type of interest. An exception exists for equity ownership of less than two percent (2%) in a Competitive Business if its stock is publicly traded on a recognized United States stock exchange. This exception allows for minor investments in publicly traded companies that might be considered competitive without violating the agreement.
After the termination of the agreement, the restrictions on 'ownership participation' continue for a period of two years. During this time, the individual is prohibited from owning a legal or beneficial interest in, or rendering services or giving advice to, any Competitive Business operating in specific locations, including the premises where the office is located, within the territory, within a 25-mile radius of the territory, or within the territory of any Focalpoint Coaching franchise in operation or under construction. This also extends to any entity that grants franchises, licenses, or other interests to others to operate any Competitive Business.
These clauses are designed to protect Focalpoint Coaching's interests by preventing franchisees and related parties from engaging in activities that could compete with the franchise during the term of the agreement and for a limited time afterward. The agreement aims to safeguard confidential information, the FocalPoint trademark, and the goodwill of Focalpoint Coaching franchises.