Is there a non-compete covenant for individuals associated with a Precision Door Service franchisee?
Precision_Door_Service Franchise · 2025 FDDAnswer from 2025 FDD Document
Covenant Not to Compete.
Except as otherwise approved in writing by the applicable Neighborly Franchisor, you may not, directly or indirectly, through, on behalf of, or in conjunction with, any other person, partnership, or legal entity, own, maintain, operate, or engage or participate in, inure benefit to, or have any financial interest, either as an officer, agent, employee, principal, partner, director, shareholder or any other individual or representative capacity, in any corporation, partnership or other legal entity that engages in any business (any such business, "Competitive Business") that is the same as or similar to the applicable Franchised Business under the applicable Franchise Agreement, or is otherwise in competition with the business of the applicable Neighborly Franchisor or applicable Neighborly Franchisor's franchisees that engages in the distribution of similar products, services and/or equipment and that is located (a) anywhere, while the applicable Franchise Agreement is in effect or (b) (i) within the territory specified on the Data Sheet to the applicable Franchise Agreement, (ii) within a 35-mile radius of the outer boundary of such territory, or (iii) inside the territory of another business operating under the applicable Neighborly Franchisors' Marks, in each case during a period of two (2) years commencing with the earlier of the termination of the applicable Franchise Agreement or the date on which you cease to be associated with Franchisee, whether because of a termination of an employment arrangement or otherwise, which period shall be extended by any period of non-compliance.
The definition of Competitive Business does not include any business that derives 80% or more (no less than 80%) of its revenue from servicing commercial, and not residential, customers.
Notwithstanding anything in this Agreement to the contrary, you may acquire up to 5% of any class of securities of any company engaged in a Competitive Business in the territory so long as you hold such securities as a passive investment and do not take an active part in the management or direction of such company and do not act as a consultant therefor or in any way render services thereto.
Source: Item 23 — Receipts (FDD pages 92–433)
What This Means (2025 FDD)
According to the 2025 Precision Door Service FDD, individuals associated with a franchisee are subject to a non-compete covenant. This covenant restricts them from engaging in any business that is the same as or similar to the Precision Door Service franchised business. This includes owning, maintaining, operating, or participating in any entity that competes with Precision Door Service or its franchisees, or that distributes similar products, services, or equipment.
The non-compete applies while the Franchise Agreement is in effect. After the agreement terminates or the individual ceases association with the franchisee, the restriction applies for two years. The geographic scope includes the territory specified in the Franchise Agreement, a 35-mile radius around that territory, and the territory of any other business operating under Precision Door Service's marks. The non-compete can be waived if written approval is obtained from the applicable Neighborly Franchisor.
There are exceptions to the non-compete. It does not apply to businesses deriving 80% or more of their revenue from commercial customers, as opposed to residential ones. Also, individuals may passively hold up to 5% of any class of securities of a company engaged in a Competitive Business, provided they do not actively participate in the management or direction of the company.