During the term of the Learningrx agreement, can a franchisee have a controlling interest in a Competitive Business?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
ce or on more favorable terms than disclosed to Franchisor in writing. Such transfer remains subject to Franchisor's prior written approval and other conditions specified in this Agreement. If Franchisor does not transfer the franchised Business to the transferee on the same terms offered to Franchisor, then Franchisee must again extend the right of first refusal to Franchisor in the manner described above, before another desired transfer.
15. GENERAL PROVISIONS
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 the 2025 Learningrx Franchise Disclosure Document, during the term of the agreement, a franchisee and their affiliates are restricted from having a direct or indirect controlling interest in a Competitive Business. This restriction applies to the franchisee, their managers, individuals associated with the franchisee (including officers, directors, shareholders, partners, members, trustees, employees, or agents), and members of the franchisee's immediate families, collectively referred to as "Franchisee Affiliates." This covenant not to compete is effective throughout the United States during the term of the Learningrx agreement.
A "Competitive Business" is defined as any business offering or franchising learning enhancement courses, brain training, cognitive training, or math and reading training courses, programs, or products. This definition is important for prospective franchisees to understand, as it clarifies the scope of businesses that would be considered competitive and thus prohibited under the agreement.
After the Learningrx agreement terminates, the covenant not to compete extends for two years. During this post-term period, the restriction applies within the franchisee's territory, in adjacent counties, within a fifty-mile radius of the franchisee's territory or any other Learningrx center, on the Internet, and on any other Multi-Area Marketing channels used by Learningrx. This means that even after the franchise agreement ends, the franchisee is still limited in their ability to engage with competitive businesses within a specific geographic area and online.