What is the significance of the franchisee acknowledging that the agreement personally obligates them to non-competition restrictions and covenants for Mrcool?
Mrcool Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee agrees that only through the course of entering into this Agreement is Franchisee being provided with access to the System, Franchisor's training, use of the Licensed Marks and, access to the Operations Manual and Confidential Information. Franchisee agrees that competition by Franchisee, Owners, Spouses and/or Immediate Family Members could jeopardize the entire System and cause irreparable harm to Franchisor and franchisees of MRCOOL Centers. Accordingly, Franchisee and Franchisee's Owners and, Spouses agree to comply with the restrictive covenants set forth in this Article 6 and throughout this Agreement.
Franchisee agrees that during the Term of this Agreement, Franchisee shall not engage in the following activities (the "Prohibited Activities"): (a) owning and/or having any legal or equitable interest whether, as an individual proprietor, owner, partner, member or shareholder of a Corporate Entity, or, in any similar capacity, in a Competitive Business other than, owning an interest of 3% or less in a publicly traded company that is a Competitive Business; (b) operating, managing, funding and/or performing services whether, as an employee, officer, director, manager, consultant, representative, agent, and/or creditor or, in any similar capacity, for or benefitting a Competitive Business; (c) diverting or attempting to divert any business or customers from Franchisor or, one of Franchisor's affiliates or franchisees; (d) inducing any customer or client of Franchisor, Franchisor's affiliates, franchisees of the System, or, of Franchisee, to any other person or business that is not a MRCOOL Center; and/or (e) engaging in any actions, inactions, and/or activities in violation of Articles 6.B. and/or 6.C. of this Agreement (all, individually and, collectively, referred to as the "Prohibited Activities"). Franchisee agrees that if Franchisee were to engage in the Prohibited Activities that such actions would be unfair, would constitute unfair competition and, would cause harm to Franchisor, the System and other MRCOOL Center franchisees. Franchisee agrees that the foregoing covenants and obligations shall also apply to Franchisee's Owners and Spouses and that Franchisee's Owners and Spouses shall each execute and deliver to Franchisor the Franchise Owner and Spouse Agreement and Guaranty in the form attached to this Agreement as Exhibit 1.
Franchisee agrees that Franchisee's failure and/or Franchisee's Owner(s) failure to comply with the restrictive covenants and obligations set forth in this Article 6 will cause irreparable harm to Franchisor and/or other MRCOOL Center franchisees for which there is no adequate remedy at law. Franchisee agrees that any violation of these Article 6 covenants and obligations by either Franchisee and/or any Owner(s) will entitle Franchisor to injunctive relief.
You shall remain subject to the non-competition covenants contained in Article 4 of this Agreement and irrespective of any purported and/or actual Transfer in violation of the terms and conditions of the Franchise Agreement.
Source: Item 23 — RECEIPTS (FDD pages 55–263)
What This Means (2025 FDD)
According to the 2025 Mrcool Franchise Disclosure Document, the franchisee's agreement to non-competition restrictions and covenants means they are legally bound to not engage in activities that could harm Mrcool's business interests, both during the term of the agreement and after it ends. This obligation extends not only to the franchisee but also to their Owners and Spouses, who must also sign a Franchise Owner and Spouse Agreement and Guaranty. These restrictions are in place because Mrcool provides franchisees with access to its System, training, Licensed Marks, Operations Manual, and Confidential Information, which are crucial for running a Mrcool Center.
The FDD specifies that franchisees acknowledge that engaging in prohibited activities constitutes unfair competition and causes irreparable harm to Mrcool and its other franchisees. Prohibited activities include owning or having an interest in a competitive business (with a minor exception for owning 3% or less of a publicly traded company), operating or managing a competitive business, diverting customers, and violating know-how restrictions. These covenants aim to protect Mrcool's market position and prevent franchisees from using the franchisor's confidential information and systems to benefit a competing business.
Mrcool emphasizes the importance of these restrictions by stating that violations can result in legal action, including injunctive relief, to prevent further harm. The franchisee acknowledges that failure to comply with these covenants will cause irreparable harm for which there is no adequate remedy at law. This acknowledgment underscores the seriousness with which Mrcool views these non-competition obligations and the potential legal consequences for franchisees who breach them.
Furthermore, even if a franchisee attempts to transfer the Franchise Agreement without Mrcool's consent, they remain subject to these non-competition covenants. This provision ensures that franchisees cannot circumvent their obligations by improperly transferring their franchise to another party. The personal guaranty of the Franchise Agreement also secures the franchisee's financial obligations, reinforcing the binding nature of these restrictions and covenants.