Does the Kitchen Solvers agreement allow for the creation of separate affiliate entities by the franchisee?
Kitchen_Solvers Franchise · 2025 FDDAnswer from 2025 FDD Document
7. COVENANTS: NON COMPETITION/CONFIDENTIALITY/COMPLIANCE WITH LAWS
7.1 Non-Compete
- 7.1.1 You and each of your owners, officers and agents will not, during the Term of this Agreement, directly, indirectly or through, on behalf of, or in conjunction with any person or legal entity:
- (a) participate as an owner, director, partner, officer, franchisee, employee, consultant, advisor, salesperson, distributor, or agent or serve in any other capacity in any Competitive Business (as defined below); or
- (b) divert, or attempt to divert any present or prospective business or customer of any Business to any competitor, by direct or indirect inducement or otherwise, or do
or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System.
For purposes of this Agreement, the term "Competitive Business" shall mean any: (a) kitchen and/or bathroom remodeling business, cabinet refacing business and/or any other business that sells products and services similar to the products and services sold at your KITCHEN SOLVERS Business; and/or (b) business that franchises or licenses the right to open and operate a business of the type identified in (a) of this provision.
- 7.1.2 During the two (2) year period after expiration or termination of this Agreement, you and your owners, officers and agents will not directly or indirectly participate as an owner, director, partner, officer, franchisee, employee, consultant, advisor, salesperson, distributor, or agent or serve in any other capacity in any Competitive Business that is located: (a) anywhere in the Development Area; (b) within a twenty-five (25) mile radius of the Development Area; (c) within any other KITCHEN SOLVERS® franchisee's territory or within any area developer's development area; or (d) within twenty-five (25) mile radius of another franchisee's territory or another area developer's development area.
Source: Item 23 — Receipts (FDD pages 49–190)
What This Means (2025 FDD)
Based on the 2025 Kitchen Solvers Franchise Disclosure Document, the agreement outlines restrictions on the franchisee's involvement in competitive businesses, but it does not explicitly address whether a franchisee can create separate affiliate entities.
Specifically, the franchise agreement states that during the term of the agreement, the franchisee, along with their owners, officers, and agents, is prohibited from participating in any capacity (owner, director, partner, etc.) with any Competitive Business, either directly, indirectly, or through another entity. A Competitive Business is defined as any kitchen/bathroom remodeling or cabinet refacing business, or any business that franchises or licenses the right to operate such a business. This restriction also extends for two years after the agreement's expiration or termination within the Development Area and surrounding areas.
While the FDD excerpts do not directly address the creation of affiliate entities by the franchisee, the broad language regarding indirect participation in competitive businesses suggests that creating a separate entity to engage in activities that would violate the non-compete clause could be problematic. A prospective franchisee should seek clarification from Kitchen Solvers regarding the permissibility of forming affiliate entities and under what conditions such entities would be allowed, especially if they have plans to diversify their business interests.