In the Learningrx agreement, what does the term 'Franchisee Affiliates' collectively refer to?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
15.1 Covenants Not to Compete. During the term of this Agreement and for two (2) years after termination, transfer, or expiration of this Agreement for any reason, Franchisee agrees that neither Franchisee, nor any manager of Franchisee, any person associated with Franchisee, including officers, directors, shareholders, partners, members, trustees, employees or agents, and any members of Franchisee's immediate families (collectively "Franchisee Affiliates"), will (i) have any direct or indirect controlling interest as a legal or beneficial owner in a Competitive Business (as hereinafter defined); (ii) perform services as a director, partner, officer, manager, employee, consultant, representative, agent or otherwise for a Competitive Business; or (iii) divert or attempt to divert any business related to, or any customer or account of the LearningRx Training Center, Franchisee's Business, Franchisor's business, the business of any affiliate of Franchisor or any other franchisee licensed by Franchisor, by direct inducement or otherwise, or divert or attempt to divert the employment of any employee of Franchisor or another franchisee licensed by Franchisor, to any Competitive Business by any direct inducement or otherwise. During the term of this Agreement, this Covenant Not to Compete applies anywhere in the United States. For two (2) years after the termination, transfer, or expiration of this Agreement, for any reason, this Covenant Not to Compete applies: (a) within Franchisee's Territory; (b) within counties adjacent to Franchisee's Territory or within a Territory then operated by or under development by Franchisor or another franchisee of Franchisor; (c) within a fifty mile radius from the boundary of Franchisees Territory or from any other franchised or company-owned LearningRx Training Center, (d) on the Internet or (e) on any other Multi-Area Marketing channels used by Franchisor.
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
According to Learningrx's 2025 Franchise Disclosure Document, the term "Franchisee Affiliates" is specifically defined within the context of covenants not to compete. It collectively refers to the franchisee, any manager of the franchisee, any person associated with the franchisee (including officers, directors, shareholders, partners, members, trustees, employees, or agents), and any members of the franchisee's immediate families. This definition is important because these individuals are also subject to certain restrictions and obligations under the franchise agreement, particularly concerning competitive activities during and after the term of the agreement.
This broad definition has significant implications for a prospective Learningrx franchisee. It means that not only the franchisee themselves but also a wide range of individuals connected to the franchisee's business and personal life are bound by the non-compete provisions. This could affect hiring decisions, business partnerships, and even the post-franchise activities of family members. The franchisee needs to ensure that all individuals falling under this definition are aware of and willing to comply with these restrictions.
The non-compete agreement restricts Franchisee Affiliates from having a direct or indirect controlling interest in a Competitive Business, performing services for a Competitive Business, or diverting business or employees to a Competitive Business. These restrictions apply during the term of the agreement anywhere in the United States and, for a period of two years after termination, within a defined geographic area including the franchisee's territory, adjacent counties, a 50-mile radius, and online channels. This is a fairly standard practice in franchising to protect the brand and trade secrets of the franchisor.
Therefore, a potential Learningrx franchisee must carefully consider the scope of the "Franchisee Affiliates" definition and the associated non-compete obligations. It is crucial to discuss these provisions with legal counsel to fully understand the implications and ensure compliance, as any violation by a Franchisee Affiliate could have serious consequences for the franchisee.