Under what conditions can a Jersey Mikes franchisee (Developer) engage in a competitive 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)
The 2025 Jersey Mikes Franchise Disclosure Document does not specify conditions under which a franchisee (referred to as a 'Developer' in some sections) can engage in a competitive business during the franchise term. However, it does outline restrictions related to ownership and operation of other businesses under specific circumstances related to debt.
Specifically, if a franchisee has a promissory note with JMFS (likely Jersey Mike's Franchise System), there are limitations. Until the note is fully paid, the franchisee and their owners must devote their full-time efforts to operating the Jersey Mikes restaurant. During this period, they are restricted from owning, maintaining, engaging in, or having any interest in any other business besides the franchised restaurant.
There is an exception to this restriction: Franchisees can own shares of a class of securities on a national stock exchange or traded on the over-the-counter market, provided that these shares represent less than 5% of the total outstanding shares of that class. This exception allows for minor investment in publicly traded companies, but it does not permit active involvement in or ownership of other businesses, especially those that might compete with Jersey Mikes, while the franchisee is still repaying their debt to JMFS.