What reasons does Goldfish Swim School give for requiring the post-termination covenant not to compete?
Goldfish_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
- 17.2.1 Franchisee acknowledges that the restrictive covenants contained in this Section and in Section 7 are fair and reasonable and are justifiably required for purposes including, but not limited to, the following:
- 17.2.1.1 to protect the Trade Secrets and other Confidential Information of Franchisor;
- 17.2.1.2 to induce Franchisor to grant a Franchise to Franchisee; and
- 17.2.1.3 to protect Franchisor against its costs in training Franchisee and its officers, directors, executives, professional staff, Designated Managers, and on-site general manager if different from the Designated Manager.
- 17.2.2 Except as otherwise approved in writing by Franchisor, neither Franchisee, nor any holder of a legal or beneficial interest in Franchisee, nor any officer, director, executive, Designated Manager, on-site general manager if different from the Designated Manager, or member of the professional management staff of Franchisee, shall, for a period of two (2) years after the expiration or termination of this Agreement, regardless of the cause of termination, either directly or indirectly, for themselves or through, on behalf of or in conjunction with, any person, persons, partnership, corporation, limited liability company or other business entity:
- 17.2.2.1 own an interest in, manage, operate or provide services to any Competitive Business located or operating (a) within a twenty-five (25) mile radius of the Approved Location or within the Area of Primary Responsibility (whichever is greater), or (b) within a twenty-five (25) mile radius of the location of any other Goldfish Swim School in existence at the time of termination or expiration; or
- 17.2.2.2 solicit or otherwise attempt to induce or influence any customer or other business associate of Franchisor to terminate or modify his, her or its business relationship with Franchisor or to compete against Franchisor.
Source: Item 23 — RECEIPTS (FDD pages 77–389)
What This Means (2025 FDD)
According to Goldfish Swim School's 2025 Franchise Disclosure Document, the post-termination covenant not to compete is required for several reasons. These include protecting Goldfish Swim School's trade secrets and other confidential information, inducing Goldfish Swim School to grant a franchise to the franchisee, and protecting Goldfish Swim School against the costs of training the franchisee and their staff.
Specifically, the agreement states that for two years after the termination or expiration of the franchise agreement, the franchisee (and anyone with an interest in the franchisee, or any officer, director, executive, or manager) cannot own, manage, operate, or provide services to a competitive business within a 25-mile radius of the Goldfish Swim School location or any other Goldfish Swim School location. They also cannot solicit or attempt to influence any customer or business associate of Goldfish Swim School to terminate or modify their relationship with Goldfish Swim School or compete against them.
This non-compete agreement is fairly standard in franchising to protect the brand and prevent franchisees from using the franchisor's knowledge to unfairly compete after the agreement ends. Prospective franchisees should carefully consider these restrictions, as they could limit their ability to work in the same industry after leaving the Goldfish Swim School system. Franchisees in Indiana should note that Section 17.2 is amended subject to Indiana Code 23-2-2.7-1(9) to provide that post-term non-competitor covenants shall have a geographical limitation of the territory granted to Franchisee.