Does the Gokhale Method agreement allow franchisees to maintain 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, operating, or having any interest in a Competitive Business during the term of their Franchise 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 prohibition does not apply to interests or activities performed in connection with the franchisee's Gokhale Method Franchised Business.
This restriction is in place to protect Gokhale Method's market share, reputation, and the goodwill associated with its brand. It prevents franchisees from directly competing with the Gokhale Method system while they are still part of it, ensuring that their efforts are focused on growing their Gokhale Method business rather than diverting resources to a competing venture. This is a fairly standard practice in franchising, as franchisors typically want to prevent franchisees from using the franchisor's proprietary information and systems to benefit a competing business during the term of the agreement.
After the termination of the franchise agreement, 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 further protect Gokhale Method's interests by preventing former franchisees from immediately leveraging their experience and knowledge gained from the Gokhale Method system to compete against it in the same geographic area. The two-year period begins when the franchisee starts complying with the non-compete terms.
It is important for prospective franchisees to carefully consider these in-term and post-term covenants, as they can significantly impact their ability to engage in related business activities, both during and after their time as a Gokhale Method franchisee. Franchisees should seek legal counsel to fully understand the scope and implications of these restrictions before entering into a Franchise Agreement.