Under the Itan franchise agreement, what is the consequence if an immediate family member engages in a prohibited activity?

According to Itan's 2025 Franchise Disclosure Document, if an immediate family member (parent, sibling, child, or grandchild) engages in a prohibited activity while the franchisee is prohibited from doing so, the franchisee is presumed to have breached the agreement. Itan includes this provision because it recognizes the difficulty in proving whether a franchisee directly disclosed confidential information to a family member who then acted on it.

This presumption of breach means that Itan can take action against the franchisee as if they themselves had engaged in the prohibited activity. This could include seeking injunctive relief, monetary damages, or even termination of the franchise agreement. The definition of "Prohibited Activities" includes owning or operating a competing business, disparaging Itan, diverting business away from Itan, or inducing someone to transfer business away from an Itan salon.

However, the franchisee has the opportunity to rebut this presumption. To do so, they must provide conclusive evidence that they did not disclose confidential information to the family member. The burden of proof is on the franchisee to demonstrate their innocence. This highlights the importance of maintaining strict confidentiality within the franchisee's family and taking proactive steps to prevent any appearance of impropriety.

This clause underscores the importance of franchisees ensuring their immediate family members understand the restrictions and obligations related to the Itan franchise. Franchisees should consider having family members sign confidentiality agreements or other documents to further protect Itan's interests and to provide additional evidence in case of a dispute. This requirement is not uncommon in franchising, as franchisors seek to protect their brand and trade secrets from potential misuse.