Is the Learningrx covenant not to compete given in consideration for access to Franchisor's Trade Secrets?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee acknowledges that, in addition to the license of the Marks hereunder, Franchisor has also licensed commercially valuable information which comprises and is a part of the System, including without limitation, proprietary processes, operations, marketing and related information and materials and that the value of this information derives not only from the time, effort and money which went into its compilation, but from the usage of the same by all franchisees of Franchisor. Accordingly, this covenant not to compete is given in part in consideration for the commercially valuable information described herein, training and access to Franchisor's Trade Secrets, and which, if used without permission, would give Franchisee an unfair advantage over Franchisor and Franchisor's franchisees and affiliates. Franchisee
acknowledges that it will be difficult or impossible to deliver learning enhancement services or cognitive or math and reading training services without using Franchisor's proprietary information and Trade Secrets and therefore in addition to the covenant not to compete found above, Franchisee agrees that Franchisee Affiliates will have the obligation of demonstrating and proving that any deliveries of learning enhancement services or cognitive or math and reading training services do not infringe on Franchisor's rights to its proprietary Information and Trade Secrets at a time when Franchisee no longer has any rights to that proprietary information or Trade Secrets.
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
According to the 2025 Learningrx Franchise Disclosure Document, the covenant not to compete is indeed given in consideration for access to Learningrx's trade secrets. The document explicitly states that the franchisee acknowledges receiving commercially valuable information, including proprietary processes, operations, marketing materials, and trade secrets, as part of the System. This information's value stems from the investment in its creation and its use by all Learningrx franchisees.
The covenant not to compete is specifically tied to this commercially valuable information, training, and access to Learningrx's trade secrets. The agreement emphasizes that unauthorized use of this information would provide the franchisee with an unfair advantage over Learningrx and its other franchisees. This highlights the importance Learningrx places on protecting its proprietary information and maintaining a level playing field among its franchisees.
Furthermore, the FDD clarifies that providing learning enhancement services or cognitive training without using Learningrx's proprietary information and trade secrets would be difficult. Therefore, franchisees and their affiliates must demonstrate that their services do not infringe on Learningrx's rights to its proprietary information, especially after the franchise agreement ends. This underscores the ongoing obligation to protect Learningrx's trade secrets, even after the franchisee's association with the brand concludes.