For Itan, what happens if an employee or independent contractor engages in a Prohibited Activity during the Restricted Period?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
You may not engage in any Prohibited Activities at any time: (i) that you are an employee or independent contractor of Franchisee; or (ii) during the Restricted Period.
Notwithstanding the foregoing, you may have an interest in a Competing Business during the Restricted Period as long as the Competing Business is not located in the Restricted Territory.
If you engage in a Prohibited Activity during the Restricted Period (other than having an interest in a Competing Business permitted by this Section) your Restricted Period will be extended by the period of time you engaged in the Prohibited Activity.
Any such extension of time will not be construed as a waiver of your breach or impair any of our rights or remedies relating to the breach.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, if an employee or independent contractor engages in a Prohibited Activity during the Restricted Period, the Restricted Period will be extended. Specifically, the extension will be for the same amount of time that the employee or independent contractor was engaged in the Prohibited Activity. This extension does not excuse the breach of contract, nor does it impair any of Itan's rights or remedies pertaining to the breach.
The FDD defines "Prohibited Activities" as owning, operating, or having an interest in a competing business (with a minor exception for owning less than 5% of a publicly-traded company), disparaging Itan or its affiliates, diverting business away from Itan, or inducing someone to move their business from an Itan salon to a competitor. The "Restricted Period" is defined as the two-year period after an individual ceases to be an employee or independent contractor of the franchisee. However, if a court deems the two-year period too long to be enforceable, the Restricted Period becomes one year.
This clause is designed to protect Itan's interests by preventing former employees or contractors from using their knowledge of the business to unfairly compete. By extending the Restricted Period, Itan aims to mitigate any potential damage caused by the Prohibited Activity. Prospective franchisees should be aware of these restrictions and ensure that their employees and independent contractors understand and comply with them to avoid potential legal issues and financial repercussions.