Does the Gokhale Method agreement allow franchisees to own a Competitive Business during the term of the agreement?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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; or that offers to sell or sells any services, equipment, products or other items which are the same as, or substantially similar to, any of the services, equipment, products or other items offered by us or our franchisees or Affiliates.
If you do not immediately comply with this paragraph upon the end of our relationship, the two-year period referred to above will commence when you begin compliance.
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. Specifically, franchisees cannot own, maintain, operate, consult for, perform services for, or have any interest in a Competitive Business, nor can they offer or sell services, equipment, products, or other items that are the same as or substantially similar to those offered by a Gokhale Method Institute location. However, this restriction does not apply to activities performed in connection with the franchisee's own Gokhale Method Franchised Business.
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 services, equipment, products, or other items that are the same as or substantially similar to those offered by Gokhale Method or its franchisees or affiliates. This broad definition means franchisees must be very careful not to engage in any side businesses that could be construed as competing with the Gokhale Method system.
After the franchise term ends, a franchisee is 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 protect Gokhale Method's market share and brand recognition. The two-year period begins when the franchisee starts complying with the restriction, meaning any delay in ceasing competitive activities will extend the restricted period. This non-compete clause is a common feature in franchise agreements to protect the franchisor's business model and customer base.