Does the Gokhale Method agreement allow a franchisee to own a Competitive Business during the term of the agreement?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
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- 17.1.3. Own, maintain, operate, engage in, act as a consultant for, perform services for, or have any interest in any Competitive Business or offer to sell or sell any services, equipment, product or other item which is the same as, or substantially similar to, any of the services, equipment, products or other items offered by a Gokhale Method Institute location. The prohibitions in this Section 17 shall not apply to interests in or activities performed in connection with your Franchised Business.
- 17.2. Post-Term Covenants. You covenant that, except as otherwise approved in writing by us, you shall not, within a 10-mile radius of your former Location or of any location then existing where the Gokhale Method is taught, and for a continuous, uninterrupted period of two (2) years following the end of our relationship with you, whether by termination, expiration or otherwise, either directly or indirectly own, maintain, operate, engage in, be employed by, provide assistance to, or have any interest in (as owner or otherwise) any Competitive Business. A "Competitive Business" is a business that: is the same as, or substantially similar to, the Franchised Business;
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to the 2024 Gokhale Method Franchise Disclosure Document, franchisees are generally prohibited from owning or being involved in a Competitive Business during the term of their agreement. A Competitive Business is defined as one that is the same as, or substantially similar to, the Gokhale Method franchised business, or that offers to sell similar services, equipment, products, or other items. However, this restriction does not apply to interests or activities performed in connection with the franchisee's own Gokhale Method Franchised Business.
This means that while a franchisee is operating a Gokhale Method franchise, they cannot simultaneously own or operate a competing business that offers similar posture training or products. This restriction is in place to protect the Gokhale Method brand and prevent franchisees from diverting resources or customers to a competing venture. The franchise agreement aims to ensure that franchisees remain fully committed to their Gokhale Method business during the term of the agreement.
After the franchise agreement ends, a franchisee is also restricted from engaging in a Competitive Business within a 10-mile radius of their former location or any existing Gokhale Method location for two years. This post-term covenant aims to further protect Gokhale Method's market and goodwill. The two-year period begins when the franchisee starts complying with the non-compete terms.
However, the Gokhale Method franchise agreement also grants franchisees the right to acquire, be acquired by, merge, affiliate with, or engage in any transaction with any other businesses (whether competitive or not), with units located anywhere or business conducted anywhere. These transactions may include arrangements involving competing businesses or outlets and dual branding or brand conversions. This clause seems contradictory to the non-compete clause, so prospective franchisees should seek clarification from Gokhale Method regarding the specific conditions under which such transactions are permissible and how they interact with the non-compete restrictions.