If an Itan franchisee engages in prohibited activity related to a competing business, how is the post-term restricted period affected?

According to Itan's 2025 Franchise Disclosure Document, if a franchisee engages in prohibited activities, including involvement with a competing business (with limited exceptions for owning less than 5% of a publicly-traded company), during the restricted period, the post-term restricted period will be extended. The extension will last for the same amount of time that the franchisee was engaged in the prohibited activity. This extension does not excuse the initial breach of contract, and Itan retains all rights and remedies related to the breach.

This means that if an Itan franchisee violates the non-compete agreement by, for example, operating a competing salon for six months during the restricted period, their restricted period could be extended by six months. This extension is in addition to any other legal actions Itan might take for the breach of contract.

It is important to note that the franchisee is permitted to have an interest in a competing business during the restricted period if that business is not located within the restricted territory. The restricted territory is generally defined as the geographic area within a 10-mile radius from the franchisee's salon and other Itan salons operating or under construction when the post-term restricted period begins. However, this 10-mile radius may be reduced to ensure enforceability by a court of competent jurisdiction.

Prospective Itan franchisees should carefully consider the scope and duration of these restrictions, as well as the potential consequences of violating them. They should also seek legal counsel to fully understand their obligations and rights under the franchise agreement.