Under what condition can an Itan franchisee 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, a franchisee may 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 a defined period after certain events, such as termination or expiration of the franchise agreement, or the franchisee no longer holds an equity interest in the business. The length of the Restricted Period is generally two years, 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 operating or under construction when the Post-Term Restricted Period begins. However, this radius may also be reduced if deemed unenforceable by a court of competent jurisdiction.
This exception to the non-compete clause allows Itan franchisees some flexibility to invest in or operate businesses that might be considered competitive, provided they are outside the immediate vicinity of existing Itan locations. However, franchisees should be aware that engaging in other Prohibited Activities during the Restricted Period, even if they have a permitted interest in a Competing Business, can extend the Restricted Period. It is also important to note that other agreements may contain non-competition covenants that extend beyond the Restricted Period defined in the franchise agreement.