Does the Focalpoint Coaching Nondisclosure and Non-Competition Agreement specify 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' by outlining restrictions on direct or indirect interests in competitive businesses. It states that during the agreement's term, franchisees, their owners, and their spouses cannot have a controlling or non-controlling interest in a Competitive Business.
Specifically, the agreement defines an exception: owning less than 2% of a publicly-traded Competitive Business is permitted. This implies that any ownership stake of 2% or more in a Competitive Business, or any controlling interest regardless of the percentage, would be considered 'ownership participation' that violates the agreement. The term 'Competitive Business' is defined as any business deriving more than 20% of its revenue from selling business training or consulting services, or those that grant franchises/licenses for similar businesses.
This clause aims to protect Focalpoint Coaching's market position by preventing franchisees from simultaneously engaging in competing ventures. Prospective franchisees should carefully evaluate these restrictions, especially if they have existing business interests or plan to invest in other companies. The agreement also requires franchisees to secure similar non-compete covenants from specified personnel, reinforcing the franchisor's commitment to safeguarding confidential information and market share.