After termination of a Franchisee Affiliate's association with a Learningrx franchisee, does the Covenant Not to Compete apply within counties adjacent to the franchisee's territory?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
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- This Covenant Not to Compete shall apply:
- a. during the term of Franchisee Affiliate's relationship, association with or employment by Franchisee anywhere within the United States; and,
- b. for the two years following the termination of Franchisee Affiliate's association with or employment by Franchisee:
- i. within Franchisee's Territory or any area serviced by Franchisee;
- ii. within counties adjacent to Franchisee's Territory or within a Territory then operated by or under development by Franchisor or another franchisee of Franchisor;
- iii. within a fifty mile radius from the boundary of Franchisees Territory or from any other franchised or company-owned LearningRx Training Center, or
- iv. on the Internet or 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 Covenant Not to Compete does apply to a Franchisee Affiliate within counties adjacent to the franchisee's territory for a period of two years after the termination of the Franchisee Affiliate's association with the Learningrx franchisee. This covenant aims to protect Learningrx's interests by preventing those closely associated with a franchisee from leveraging their knowledge and experience to compete against the franchise shortly after their affiliation ends. The term "Franchisee Affiliates" includes managers, officers, directors, shareholders, partners, members, trustees, employees, agents, and immediate family members of the franchisee.
Specifically, the Covenant Not to Compete 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. A "Competitive Business" is defined as any business offering learning enhancement, brain training, or math and reading training courses, programs, or products. This broad definition ensures that Franchisee Affiliates cannot easily circumvent the covenant by engaging in similar educational services under a different guise.
Besides counties adjacent to the franchisee's territory, the Covenant Not to Compete also applies within the franchisee's territory, within a fifty-mile radius of the franchisee's territory or any other Learningrx center, and on the Internet or other multi-area marketing channels used by Learningrx. This multi-faceted restriction ensures comprehensive protection for Learningrx across various geographic and marketing platforms. The restrictions do not apply to ownership of less than 5% of shares in a publicly traded company.
For a prospective Learningrx franchisee, this means that anyone closely associated with their franchise operation will be legally restricted from engaging in competitive activities within the specified areas for two years after their association ends. This provision is designed to safeguard the franchisee's investment and the integrity of the Learningrx system by preventing unfair competition from individuals who have gained knowledge and experience through their affiliation with the franchise.