Are there any exceptions to the restrictions on a Jersey Mikes franchisee's involvement in a competing business during the term of the franchise agreement?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding anything set forth in the Franchise Agreement, Franchisee's owners (or if Franchisee is an individual, then Franchisee) must devote his or her full time efforts to operating the Restaurant until the full am ount due under the Note is rep aid to JMFS. In addition, Franchisee's owners (or if Franchisee is an individual, then Franchisee) may not own, maintain, engage in, or have any interest in any business other than the Franchised Restaurant until the full amount due under the Note is repaid to JMFS; provided, however, this restriction will not be applicable to the ownership of shares of a class of securities on a national stock exchange or traded on the over-the-counter market that represent less than five percent (5%) of the number of shares of that class of securities issued and outstanding.
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
According to the 2025 Jersey Mikes Franchise Disclosure Document, a franchisee is generally restricted from owning, maintaining, engaging in, or having any interest in any business that specializes in the sale of submarine-type sandwiches or prepared food products similar to those sold in the Jersey Mikes system. However, there is an exception to this restriction under specific circumstances related to a loan from JMFS (presumably Jersey Mike's Franchise System).
Specifically, if a franchisee has a promissory note with JMFS, the franchisee's owners must devote their full-time efforts to operating the Jersey Mikes restaurant until the note is fully repaid. During this period, they are prohibited from owning, maintaining, engaging in, or having any interest in any other business. However, this restriction does not apply to the ownership of shares of a class of securities on a national stock exchange or traded on the over-the-counter market, provided that such shares represent less than five percent (5%) of the outstanding shares of that class.
This exception allows a Jersey Mikes franchisee to invest in publicly traded securities, even if those securities are in a competing business, as long as the investment remains below the 5% threshold and the franchisee has a loan outstanding with JMFS. This provides a limited avenue for diversification while ensuring the franchisee's primary focus remains on the Jersey Mikes business during the repayment period of the loan.