Is disparaging Itan considered a 'Prohibited Activity'?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
- "Prohibited Activities" means and includes any of the following: (a) owning, operating or having any other interest (e.g., as a director, officer, employee, manager, consultant, creditor, representative, agent or in any similar capacity) in a Competing Business, other than owning less than 5% of the Equity Interests in a Competing Business that is a publicly-traded company; (b) disparaging or otherwise making negative comments about us, our affiliate, the System or a Salon (this provision does not prohibit disclosure of truthful information to Governmental Authorities); (c) diverting business from us, our affiliate or another franchisee; or (d) inducing a Person to transfer their business from a Salon to a competitor.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, disparaging Itan, its affiliates, the Itan system, or an Itan salon is explicitly defined as a 'Prohibited Activity'. This means that franchisees are contractually obligated to refrain from making negative comments about the brand, its operations, or other franchisees. However, the FDD also clarifies that this provision does not prohibit the disclosure of truthful information to Governmental Authorities.
This restriction is a fairly standard clause in franchise agreements, designed to protect the brand's reputation and maintain a positive image. For a prospective Itan franchisee, this means understanding that public criticism or negative statements about the franchise could be considered a breach of contract, potentially leading to legal repercussions. It is important to note the exception for disclosing truthful information to governmental authorities, which provides some protection for franchisees who need to report issues to regulatory bodies.
Itan's ability to unilaterally modify the brand protection covenants, including the scope of prohibited activities, provides Itan with flexibility to adapt the restrictions as needed. While this could benefit franchisees by narrowing the scope of restrictions, it also introduces an element of uncertainty, as the franchisor could potentially broaden the restrictions during the franchise term. Therefore, a prospective franchisee should carefully consider the implications of this clause and seek clarification from Itan regarding the circumstances under which such modifications might occur.