Is operating a competing business a curable or non-curable default for a Pump It Up franchisee?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
(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.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 47–50)
What This Means (2025 FDD)
The 2025 Pump It Up Franchise Disclosure Document addresses the restrictions placed on franchisees regarding involvement with competing businesses, but it does not explicitly state whether operating a competing business constitutes a curable or non-curable default. The FDD states that franchisees have access to confidential information and that Pump It Up has made substantial investments in developing its system. To protect these investments and encourage the exchange of ideas among franchisees, Pump It Up restricts franchisees from holding interests in competing businesses. These are defined as children's entertainment centers or recreation/entertainment businesses with similar operations or trade dress.
The agreement prohibits franchisees and their owners from owning, operating, or having any interest in a competing business during the term of the agreement and for a specified period after termination. This includes acting as an owner, partner, director, officer, manager, employee, consultant, representative, or agent. Franchisees are also prohibited from diverting business, employees, or customers to a competing business.
Since the FDD does not specify whether this breach is curable, prospective franchisees should seek clarification from Pump It Up regarding the specific consequences of violating these restrictions and whether there is an opportunity to correct the breach. Understanding the franchisor's stance on this matter is crucial for assessing the risks and obligations associated with the franchise agreement.