If an Itan franchisee breaches a brand protection covenant in §14, can Itan terminate the franchise agreement?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
hat potential fee increase will accumulate and may be carried forward and applied in connection with a subsequent fee adjustment. We may also adjust the cap on periodic remodeling expenses in §11.10 at the same time, and in the same manner, as we adjust fees in accordance with this Section.
14. BRAND PROTECTION COVENANTS.
- 14.1. Reason for Covenants. The Intellectual Property, training and assistance we provide would not be acquired except through implementation of this Agreement. You agree that competition by you, the Owners or Persons associated with you or the Owners (including family members) could seriously jeopardize our franchise system because you and the Owners receive an advantage through knowledge of our day-to-day operations and Know-how. You and the Owners agree to comply with the covenants in §14 to protect the Intellectual Property and our franchise system.
- 14.2. Intellectual Property & Confidential Information*.* You and the Owners agree to: (a) refrain from using any Intellectual Property or Confidential Information in any business or for any purpose other than the operation of your Salon pursuant to this Agreement; (b) maintain the confidentiality of our Confidential Information at all times; (c) refrain from making unauthorized copies of documents containing Confidential Information; (d) take all steps we reasonably require to prevent unauthorized use or disclosure of Confidential Information; and (e) stop using the Intellectual Property and Confidential Information immediately upon the expiration, termination or Transfer of this Agreement (any Owner who ceases to be an Owner before the expiration, termination or Transfer of this Agreement must stop using the Intellectual Property and Confidential Information immediately at the time he or she ceases to be an Owner).
- 14.3. Unfair Competition. You and the Owners may not engage in any Prohibited Activities during the Term or Post-Term Restricted Period. Notwithstanding the foregoing, you and the Owners may have an interest in a Competing Business during the Post-Term Restricted Period as long as the Competing Business is not located in the Restricted Territory. If you or an Owner engage in a Prohibited Activity during the Post-Term Restricted Period (other than having an interest in a
Competing Business permitted by this Section), then the Post-Term Restricted Period applicable to you or the non-compliant Owner, as applicable, shall be extended by the period of time during which you or the non-compliant Owner, as applicable, engaged in the Prohibited Activity.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
Based on the 2025 FDD, the excerpts provided do not explicitly state whether Itan can terminate the franchise agreement for a breach of the brand protection covenants in §14. However, the FDD does outline the importance of these covenants and the potential remedies Itan may pursue.
Specifically, §14 emphasizes that the intellectual property, training, and assistance provided by Itan are contingent upon the franchisee's adherence to the franchise agreement. It states that non-compliance could seriously jeopardize the franchise system. While this section highlights the significance of the brand protection covenants, it does not directly address termination as a consequence of breaching them.
Attachment F, the Brand Protection Agreement, mentions that a breach of §3 (which outlines specific brand protection covenants) is likely to cause substantial and irreparable damage to Itan and/or other franchisees. In such cases, Itan is entitled to injunctive relief and any other relief available at equity or law. This suggests that Itan may seek legal remedies, but it does not confirm whether termination is an option. A prospective franchisee should clarify with Itan whether a breach of the brand protection covenants in §14 would constitute grounds for termination of the franchise agreement.