Does the Learningrx franchise agreement define 'Area Developer Affiliates'?
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)
The 2025 Learningrx Franchise Disclosure Document (FDD) does not explicitly define "Area Developer Affiliates." However, it does define "Franchisee Affiliates" within the context of covenants not to compete. This definition includes the franchisee, their managers, individuals associated with the franchisee (such as officers, directors, shareholders, partners, members, trustees, employees, and agents), and members of the franchisee's immediate families. These "Franchisee Affiliates" are subject to certain restrictions regarding competitive business activities during the term of the agreement and for a period after termination, transfer, or expiration.
While the FDD does not define "Area Developer Affiliates", it does address the responsibilities and restrictions placed upon Area Developers and their affiliated parties. For instance, the agreement outlines conditions under which an Area Developer can be in default, including failure to comply with the development schedule or any individual franchise agreement. It also specifies that if any franchise agreement issued to the Area Developer or its affiliates is terminated, Learningrx has the right to terminate the Area Development Agreement.
Furthermore, the FDD includes non-compete clauses that apply to Area Developers, preventing them and those associated with them from engaging in competitive businesses during and after the agreement term. These clauses extend to anyone with a direct or indirect controlling interest in a competitive business or who performs services for one. Given the absence of a specific definition for "Area Developer Affiliates," prospective franchisees should seek clarification from Learningrx regarding the scope and implications of these restrictions on related parties to ensure full understanding of their obligations and limitations.