After the Punch King Fitness agreement terminates, is a franchisee prohibited from soliciting clients of the franchised business?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
C. Covenants after Termination of Franchise Agreement
Franchisee further covenants that, except as otherwise approved in writing by Franchisor, Franchisee shall not, directly or indirectly, for itself or through, on behalf of, or in conjunction with any person, persons, partnership, or corporation:
- 1. for a continuous and uninterrupted period commencing upon the expiration or termination of this Agreement (regardless of the cause for termination) and continuing for two (2) years thereafter, own, maintain, operate, engage in, or have any interest in any business offering boxing and kickboxing, or any other services that had been offered by the Franchised Business, within twenty-five (25) miles of any Punch King Fitness Franchised Business; or
- 2. for a continuous and uninterrupted period commencing upon the expiration or termination of this Agreement (regardless of the cause for termination) and continuing for two (2) years thereafter, directly or indirectly solicit or perform services for any person who was a client of the Franchised Business at any time during the term of this Agreement.
- 3. Franchisee and Franchisor agree that the covenants contained in this Section shall survive the expiration, termination, or cancellation of this Agreement. In the event of the violation of this Section by Franchisee following expiration, termination, or assignment of this Agreement, the period of time Franchisee shall be required to abide by the breached obligation shall be extended to a period of two (2)
Source: Item 22 — CONTRACTS (FDD pages 56–215)
What This Means (2024 FDD)
According to Punch King Fitness's 2024 Franchise Disclosure Document, franchisees are restricted from soliciting clients of the franchised business after the termination of the franchise agreement. Specifically, for a period of two years after the agreement ends, a franchisee cannot directly or indirectly solicit or perform services for anyone who was a client of the Punch King Fitness business during the term of the agreement. This restriction applies regardless of the reason for the termination.
This post-termination covenant aims to protect the goodwill of the Punch King Fitness brand and the customer base that the franchise has built during its operation. It prevents a former franchisee from leveraging their knowledge of the client base to unfairly compete with existing Punch King Fitness franchises or the franchisor itself. The restriction is in place for a continuous and uninterrupted period of two years.
If a franchisee violates this non-solicitation clause after the termination of the agreement, the period during which they are required to comply with the obligation will be extended by two years from the date they cease the breaching activity. This provision serves as an additional deterrent against violating the non-solicitation agreement and protects Punch King Fitness's interests.
This type of restriction is common in franchising to protect the brand and other franchisees. Prospective franchisees should carefully consider the implications of these post-termination covenants, as they can significantly impact their ability to operate a similar business in the same area after leaving the Punch King Fitness system.