Can a proposed transferee of a Pump It Up franchise have an ownership interest in a competing business?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
ting Principal and all 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.
Source: Item 23 — RECEIPTS (FDD pages 60–225)
What This Means (2025 FDD)
According to Pump It Up's 2025 Franchise Disclosure Document, a franchisee is restricted from holding interests in competing businesses, defined as children's entertainment centers or recreation/entertainment businesses with similar operations or trade dress. Pump It Up includes this restriction to protect their system, confidential information, and encourage the free exchange of ideas among franchisees.
The agreement states that during the term of the franchise agreement and for a "Restrictive Period" following its expiration or termination, franchisees and their owners cannot own, operate, or have any direct or indirect interest in a competing business. This includes acting as an owner, partner, director, officer, manager, employee, consultant, representative, or agent. The "Restrictive Period" is defined as two years from the date the Franchise Agreement expires or is terminated.
However, there is an exception: owning less than 2% of a Competing Business whose stock is publicly traded on a recognized U.S. stock exchange is not considered a violation. This restriction applies without geographical limitation during the term of the agreement. After a transfer, these restrictions also apply, as detailed in Section 16.B.(3).