What constitutes a breach of the Restrictive Covenant Agreement for a Punch King Fitness franchise?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
Covenantor further acknowledges that any use of the Marks outside the scope of the Franchise Agreement without Franchisor's prior written consent would be an infringement of Franchisor's rights in the Marks. Covenantor expressly covenants that he/she shall not, directly or indirectly, commit an act of infringement or contest, or aid in contesting, the validity or ownership of the Marks or take any other action in derogation thereof during the term of the Franchise Agreement or after the expiration or termination thereof pledges that his/her violation of any of the covenants contained in this Agreement would result in irreparable injury to Franchisor and Franchisee, for which no adequate remedy at law may be available, and accordingly consents to the issuance of, and agrees to pay all court costs and reasonable attorney fees incurred by Franchisor or Franchisee in obtaining, an injunction enjoining any conduct by Covenantor prohibited by the terms of this Agreement. This remedy shall be in addition to any and all other remedies that may be available to Franchisor or Franchisee.
- **3.
Non-competition**.
Covenantor covenants that, during the term of the Franchise Agreement and for a continuous and uninterrupted period commencing upon the expiration or termination of the Franchise Agreement (regardless of the cause for termination) and continuing for two (2) years thereafter, directly or indirectly, for him/herself or through, on behalf of, or in conjunction with any person, entity or organization, own, maintain, operate, engage in, or have any interest in, any business offering boxing and kickboxing or any other products or services that have been offered by the Franchised Business, within twenty-five (25) miles of any Punch King Fitness Franchised Business.
This restriction shall not apply to the beneficial ownership by Covenantor of less than five percent (5%) of the outstanding equity securities of any corporation whose securities are registered under the Securities and Exchange Act of 1934.
In the event of the violation of this provision following expiration, termination, or assignment of the Franchise Agreement, the period of time Covenantor shall be required to abide by the breached obligation shall be extended to a period of two (2) years after Covenantor is no longer in breach of such obligation.
Source: Item 22 — CONTRACTS (FDD pages 56–215)
What This Means (2024 FDD)
According to the 2024 Punch King Fitness Franchise Disclosure Document, a franchisee (or Covenantor) breaches the Restrictive Covenant Agreement if they violate the terms outlined within it, particularly concerning proprietary marks and non-competition. The agreement emphasizes that using Punch King Fitness's marks outside the scope of the Franchise Agreement without prior written consent constitutes an infringement of the franchisor's rights. This includes any action that contests the validity or ownership of the marks during or after the franchise term. Such violations can lead to irreparable injury to Punch King Fitness, potentially resulting in legal action.
The Restrictive Covenant Agreement also includes a non-competition clause. During the term of the Franchise Agreement and for two years after its expiration or termination, the franchisee cannot directly or indirectly own, maintain, operate, engage in, or have any interest in a business offering boxing and kickboxing or similar services offered by Punch King Fitness. This restriction applies within a 25-mile radius of any Punch King Fitness franchised business.
There is an exception to the non-competition clause, allowing the franchisee to hold less than 5% of the outstanding equity securities of a corporation registered under the Securities and Exchange Act of 1934. If a franchisee violates the non-competition provision after the Franchise Agreement expires or terminates, the period during which they must abide by the obligation extends to two years after they cease the breaching activity. This means that any breach of these covenants can result in legal consequences, including injunctions and financial liabilities for court costs and attorney fees, in addition to other available remedies for Punch King Fitness.