Can Itan prohibit a franchisee from joining a trade association?
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, the franchise agreement does not explicitly prohibit a franchisee from joining a trade association. However, the agreement does define "Prohibited Activities," which include actions like disparaging Itan, its affiliates, the Itan system, or another Itan salon.
Specifically, the definition of "Prohibited Activities" includes "(b) disparaging or otherwise making negative comments about us, our affiliate, the System or a Salon". If a franchisee were to join a trade association and engage in such disparaging behavior, it could be construed as a violation of the franchise agreement. This could potentially lead to legal issues or termination of the franchise agreement.
It is important for a prospective Itan franchisee to carefully consider these restrictions and how they might impact their ability to participate in industry-related organizations or express opinions about the franchise system. Franchisees should seek clarification from Itan regarding the extent to which they can engage with trade associations without violating the terms of the franchise agreement.