Can a Pump It Up franchisee be involved with a Competing Business after transferring their franchise?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
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. is deemed unenforceable by virtue of its scope in terms of area, business activity prohibited, and/or length of time, but would be enforceable if modified, you and we agree that the covenant will be enforced to the fullest extent permissible under the laws and public policies applied in the jurisdiction whose law determines the covenant's validity.
Source: Item 23 — RECEIPTS (FDD pages 60–225)
What This Means (2025 FDD)
According to the 2025 Pump It Up FDD, a franchisee is restricted from involvement with a Competing Business during the term of the Franchise Agreement and for a Restrictive Period afterward. This restriction extends even after a transfer of the franchise. The Restrictive Period is defined as two years from the date the Franchise Agreement expires or is terminated. However, if a court deems this period unenforceable, it will be reduced to one year, and if that is also unenforceable, it will be further reduced to six months from the date of expiration or termination.
The restrictions 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. These geographical limitations are assessed on the later of the termination/expiration date or the date all restricted parties begin complying with the non-compete obligations. Non-compliance during the Restrictive Period does not count towards fulfilling the obligations of the non-compete agreement.
However, there is an exception: owning less than 2% of a Competing Business is allowed if its stock is publicly traded on a recognized United States stock exchange. If any part of the non-compete agreement is deemed unenforceable, Pump It Up and the franchisee agree to have it enforced to the fullest extent permissible under applicable laws and public policies. This means that even after transferring a Pump It Up franchise, the franchisee remains bound by these non-compete restrictions, limiting their ability to engage with competing businesses for a specified period and within a defined geographic area.