Under what condition can an Itan employee or independent contractor have an interest in a Competing Business during the Restricted Period?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) Unfair Competition. You may not engage in any Prohibited Activities at any time: (i) that you are (or your spouse is) an Owner; 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 any 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 during which you engaged in the
Prohibited Activity. Any such extension of time will not constitute a waiver of your breach or impair any of our rights or remedies relating to your breach. For purposes of clarity, you remain bound by any non-competition covenants in other Definitive Agreements that remain in effect for a period of time that extends beyond the expiration of the Restricted Period under this Agreement, and the expiration of the Restricted Period under this Agreement does not in any way diminish your obligation to comply with such other covenants.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, an employee or independent contractor can have an interest in a Competing Business during the Restricted Period if the Competing Business is not located in the Restricted Territory. The Restricted Period is generally two years after ceasing to be an employee or independent contractor of the franchisee, but it may be reduced to one year if a court deems the two-year period unenforceable.
The Restricted Territory is defined as the geographic area within a 10-mile radius from the franchisee's salon and all other Itan salons that are operating or under construction when the Restricted Period begins. However, this territory may also be reduced if a court finds the 10-mile radius too broad to be enforceable.
This means that an Itan employee or independent contractor could potentially work for or own a competing business outside of this 10-mile radius (or the reduced radius determined by a court) during their restricted period without violating the agreement. However, it is important to note that engaging in any Prohibited Activity during the Restricted Period, other than having a permitted interest in a Competing Business, will extend the Restricted Period by the amount of time the Prohibited Activity occurred.