What happens if a Learningrx franchisee starts a competing business?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
(c) Franchisee or Franchisee's owner or any guarantor of this Agreement starts, acquires or operates a competing business or diverts or attempts to divert current or prospective customers to a competing business in violation of the terms of the Confidentiality and Covenant Not To Compete Agreement attached to this Agreement as Attachment IX, and incorporated herein by reference.
13.2 Effect of Termination.
Franchisee or Franchisee's owner or any guarantor of this Agreement starts, acquires or operates a competing business or diverts or attempts to divert current or prospective customers to a competing business in violation of the terms of the Confidentiality and Covenant Not To Compete Agreement attached to this Agreement as Attachment IX, and incorporated herein by reference.
Upon any termination or expiration of this Agreement, all obligations that by their terms or by reasonable implication survive termination, including those pertaining to non-competition, confidentiality, and indemnity, will remain in effect, and Franchisee must immediately:
(a) promptly pay all amounts owed to Franchisor based on the operation of the Center through the effective date of termination;
(b) return, at Franchisee's sole cost and expense, including but not limited to shipping costs, to Franchisor all copies of the Operations Manual, customer lists, records, files, instructions, brochures, advertising materials, testing materials of any form or nature, agreements, Confidential Information and any and all other materials provided by Franchisor to Franchisee or created by a third-party for Franchisee relating to the operation of the Business, all items containing any Marks, copyrights, and other proprietary items, and all other items specifically identified in any written communication to Franchisee or in the Operations Manual;
(c) cancel or assign within five (5) business days all registrations relating to its use of any of the Marks, in Franchisor's sole and absolute discretion.
Franchisee must notify the telephone, Internet, email, electronic network, directory, and listing entities of the termination or expiration of the Franchisee's right to use any numbers, addresses, domain names, locators, directories and listings associated with any of the Marks, and must authorize their transfer to the Franchisor or any new franchisee as may be directed by the Franchisor.
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
According to Learningrx's 2025 Franchise Disclosure Document, both during the term of the Franchise Agreement and for two years after its termination, transfer, or expiration, the franchisee and their affiliates are restricted from engaging in any Competitive Business. This includes having a direct or indirect controlling interest in a Competitive Business, performing services for one, or diverting business or employees to a Competitive Business. This non-compete clause applies throughout the United States during the agreement's term.
After the agreement ends, the non-compete restrictions apply for two years within the franchisee's territory, adjacent counties, areas under development by Learningrx or its franchisees, a 50-mile radius from any Learningrx center, and on the Internet or any multi-area marketing channels used by Learningrx. A Competitive Business is defined as any business offering learning enhancement, brain training, or math and reading training courses, programs, or products. The franchisee acknowledges that Learningrx has licensed commercially valuable information, including proprietary processes, operations, and marketing materials, and that this information gives them an advantage.
If a Learningrx franchisee violates the non-compete agreement by starting, acquiring, or operating a competing business or diverting customers, it constitutes a breach of the Confidentiality and Covenant Not To Compete Agreement (Attachment IX). Such a violation can lead to termination of the Franchise Agreement. Upon termination or expiration of the agreement, obligations related to non-competition, confidentiality, and indemnity remain in effect. The franchisee must also pay all outstanding amounts, return all materials related to the Learningrx business, and cancel or assign registrations related to the use of Learningrx's marks.