Does the Pump It Up agreement prevent franchisees from making loans to a competing business?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
(2) You agree that, during the term of this Agreement and for the "Restrictive Period" (defined below) following the expiration or earlier termination of this Agreement, you and your owners, either directly or indirectly, for yourself, or through, on behalf of, or in conjunction with, any person, firm, partnership, corporation, limited liability company, or other entity, will not:
- (a) own, maintain, operate, engage in, franchise or license, advise, help, make loans to, or have any direct or indirect controlling or non-controlling interest as an owner (whether of record, beneficially, or otherwise) or be or perform services as a partner, director, officer, manager, employee, consultant, representative, or agent in any Competing Business; or
Source: Item 23 — RECEIPTS (FDD pages 60–225)
What This Means (2025 FDD)
According to Pump It Up's 2025 Franchise Disclosure Document, the franchise agreement places restrictions on a franchisee's involvement with competing businesses. Specifically, during the term of the agreement and for a defined restrictive period after the agreement's expiration or termination, franchisees (and their owners) are prohibited from making loans to competing businesses. Competing businesses are defined as children's entertainment centers or recreation/entertainment businesses with similar operations or trade dress to the Pump It Up system.
This restriction means that as a Pump It Up franchisee, you cannot directly or indirectly provide financial assistance to businesses that compete with Pump It Up. This includes not only direct competitors like other children's entertainment centers but also businesses that operate in a similar manner or have a similar appearance to Pump It Up. The restrictive period extends for two years after the franchise agreement ends, but this period may be reduced by a court.
The agreement specifies that these restrictions apply without geographical limitation during the term of the agreement. After the agreement ends, the restrictions apply at the premises, within a 5-mile radius of the protected area's outer boundaries, and within 5 miles of any other Pump It Up location. Equity ownership of less than 2% in a publicly traded competing business is an exception to these restrictions. These limitations are designed to protect Pump It Up's business model and confidential information by preventing franchisees from supporting rival ventures, ensuring that franchisees remain committed to the success of the Pump It Up system.