Is a Hydrodog franchisee allowed to operate a competitive business outside of the restricted territory?
Hydrodog Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) have any direct or indirect interest as a disclosed or beneficial owner in a Competitive Business, other than your HydroDog Business;
- (b) have any direct or indirect controlling interest as a disclosed or beneficial owner in a Competitive Business, wherever located;
- (c) have any direct or indirect interest (e.g. through a spouse or child) as a disclosed or beneficial owner, investor, partner, director, officer, employee, consultant, member, Manager, representative or agent or in any other capacity in any Competitive Business operating (i) within the Territory; (ii) within twenty-five (25) miles of the Territory; or (iii) within twenty-five (25) miles of any other HydroDog Business's Territory in operation or under development on the later of (a) the effective date of the termination or expiration of this Agreement or (b) the date on which you cease to have any direct or indirect interest in a Competitive Business;
- (d) perform services as a director, officer, Manager, employee, consultant, representative, agent or otherwise for a Competitive Business, wherever located; or
- (e) on behalf of yourself or any other person, or as an employee, proprietor, owner, consultant, agent, contractor, employer, affiliate, partner, officer, director or associate, or stockholder of any other person or entity, or in any other capacity, engage in or conduct any other business if you have any significant operational or management responsibility or obligation regarding such business, if such other business would interfere with your obligations under this Agreement to develop and operate your HydroDog business or otherwise (other than the HydroDog Businesses operated under franchise agreements with us), unless your HydroDog business is managed by a Chief Operating Officer, or equivalent position, approved by us, who has satisfactorily completed our training programs. This provision does not prohibit passive investments in other businesses that do not compete directly or indirectly with HydroDog business. However, an interest in a business in which your capacity is either a director, officer or majority stockholder (or any combination thereof) does not constitute a passive investment, and will be considered a breach of these provisions of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 43–166)
What This Means (2025 FDD)
According to the 2025 Hydrodog Franchise Disclosure Document, a franchisee's ability to operate a competitive business is restricted both within and outside of their designated territory. The FDD specifies that a franchisee cannot have a direct or indirect controlling interest in a Competitive Business, regardless of its location. A "Competitive Business" is broadly defined as any business offering pet grooming, care, products, or services similar to those of Hydrodog, excluding other Hydrodog franchises. This restriction applies during the term of the franchise agreement.
Specifically, the franchisee is prohibited from having any interest (e.g., as an owner, investor, partner, director, officer, employee, or consultant) in a Competitive Business operating within the franchisee's territory, within 25 miles of that territory, or within 25 miles of any other Hydrodog Business's territory. The franchisee is also barred from performing services for a Competitive Business, regardless of its location. Even engaging in another business with significant operational or management responsibility that would interfere with their Hydrodog obligations is prohibited, unless they have an approved Chief Operating Officer managing their Hydrodog business.
However, the agreement does allow for passive investments in non-competing businesses. A passive investment is defined as one where the franchisee is not a director, officer, or majority stockholder. Any violation of these competitive restrictions can result in the franchisee being required to pay liquidated damages equal to Hydrodog's then-current initial franchise fee. This comprehensive restriction aims to protect Hydrodog's market position and prevent franchisees from diverting resources or confidential information to competing ventures, even outside of their immediate territory.