Does the Pump It Up franchise agreement prevent franchisees from operating a competing business?

employees and any other person or entity you wish to disclose any Confidential Information to sign agreements, in a form acceptable to us, that they will maintain the confidentiality of the disclosed information. The agreements must identify us as a third-party beneficiary with the independent right to enforce the agreements.

B. Restrictions.

(1) You acknowledge and agree that: (a) pursuant to this Agreement, you will have access to the Confidential Information; (b) the System and the opportunities, associations and experience established by us and acquired by you under this Agreement are of substantial and material value; (c) in developing the System, we and our affiliates have made and continue to make substantial investments of time, technical and commercial research, and money; (d) we would be unable to adequately protect the System and the Confidential Information against unauthorized use or disclosure and would be unable to adequately encourage a free exchange of ideas and information among Pump It Up Businesses if our franchisees were permitted to hold interests in "Competing Businesses" (which are defined as (1) children's entertainment centers, or (2) recreation or entertainment businesses whose method of operation or trade dress is similar to that employed in the System); and (e) restrictions on your right to hold interests in, or perform services for, Competing Businesses will not be a hindrance to you. You and your owners expressly acknowledge that you possess skills and abilities of a general nature and have other opportunities for exploiting these skills outside of a Competing Business. Consequently, our enforcement of the restrictions contained in this Section will not deprive you of your personal goodwill or ability to earn a living.

• (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
  • (b) divert or attempt to divert, by direct or indirect inducement or otherwise, any actual or potential business, employee, agent or customer of any Pump It Up Business to a Competing Business.
• (3) For purposes of this Agreement, the term "Restrictive Period" shall be two years from the date the Franchise Agreement expires or is terminated; provided however, that if a court determines that such period is unenforceable, the Restrictive Period shall end one year from the date the Franchise Agreement expires or is terminated; provided however, that if a court determines that such period is unenforceable, the Restrictive Period shall end six months from the date the Franchise Agreement expires or is terminate.
• (4) During the term of this Agreement, there is no geographical limitation on the restrictions contained in this Section 18.B. During the Restrictive Period, these restrictions will apply at the Premises; within a 5-mile radius of the outer boundaries of the Protected Area; and within 5 miles of any other Pump It Up Business in operation or under construction on the later of: (i) the date of the termination or expiration of this Agreement; or (ii) the date on which all persons restricted by Section 18.B. begin to comply with Section 18.B.
• (5) If, at any time during the Restrictive Period, you or your owners fail to comply with your obligations contained in this Section 18.B., that period of noncompliance will not be credited toward the satisfaction of your obligations under this Section 18.B. These restrictions also apply after Transfers, as provided in Section 16.B.(3) above. Equity ownership of less than 2% of a Competing Business whose stock or other forms of ownership interest are publicly traded on a recognized United States stock exchange will not be deemed to violate this Section 18.B.
• (6) If any restriction in this Section 18.B.

Source: Item 23 — RECEIPTS (FDD pages 60–225)