Is a Punch King Fitness franchisee prohibited from diverting business to a competitor?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee agrees to maintain the confidentiality of all information strictly received relating to the Punch King Fitness Method and not to use, in connection with the offering or selling of boxing and kickboxing, or similar business, any trade secrets or confidential information obtained from Franchisor.
WHEREAS, as a condition precedent to granting the Franchise to Franchisee, all shareholders, officers, partners, or members of Franchisee must execute the covenants contained herein;
NOW, THEREFORE, as additional consideration and inducement for granting the Franchise to Franchisee, Covenantor hereby agrees and covenants to Franchisee as follows:
- 1. Confidentiality. Covenantor acknowledges the proprietary and confidential nature of Franchisor's Operating Manual, which Franchisee has received on loan from Franchisor, unique sales and marketing methods, pricing techniques, promotional materials, new product development, financial information, client or referral lists, procedures for the efficient operation of a Punch King Fitness Franchised Business, and any other methods, procedures, processes, techniques, information, knowledge, or know-how concerning Franchisor's franchise system or Franchisee's Franchise, in particular, that may not be commonly known to the public or to Franchisor's or Franchisee's competitors and that Franchisor or Franchisee has identified or may identify as proprietary and confidential information (Trade Secrets). Covenantor shall use such Trade Secrets solely for Franchisee's benefit and shall not, during the term of the Franchise Agreement or at any time thereafter, communicate, divulge, or use any Trade Secrets to or for the benefit of any other person, entity, or organization.
Franchisee acknowledges that any failure to comply with this Section will cause Franchisor irreparable injury, and Franchisee consents to the issuance of and agrees to pay all court costs and reasonable attorneys' fees incurred by Franchisor in obtaining, specific performance of, or any injunction against a violation of, the requirements of this Section.
Source: Item 22 — CONTRACTS (FDD pages 56–215)
What This Means (2024 FDD)
According to Punch King Fitness's 2024 Franchise Disclosure Document, a franchisee is restricted from using the franchisor's trade secrets or confidential information for the benefit of any other person, entity, or organization. Specifically, the franchisee must maintain the confidentiality of all information relating to the Punch King Fitness Method and not use any trade secrets or confidential information obtained from Punch King Fitness in connection with offering or selling boxing, kickboxing, or similar businesses. This restriction applies both during the term of the Franchise Agreement and at any time thereafter.
Furthermore, all shareholders, officers, partners, or members of the franchisee must execute covenants agreeing to these confidentiality terms as a condition of the franchise being granted. These individuals, referred to as 'Covenantors,' acknowledge the confidential nature of Punch King Fitness's Operating Manual, sales and marketing methods, pricing techniques, promotional materials, new product development, financial information, client or referral lists, and procedures for efficient operation. They agree to use such trade secrets solely for the franchisee's benefit and not to disclose or use them for the benefit of any other party.
If a franchisee fails to comply with these confidentiality requirements, Punch King Fitness acknowledges that it will suffer irreparable injury. In such cases, the franchisee consents to the issuance of specific performance or an injunction against the violation and agrees to cover all court costs and reasonable attorney's fees incurred by Punch King Fitness in enforcing these provisions. This underscores the importance Punch King Fitness places on protecting its proprietary information and preventing franchisees from using it to compete, either directly or indirectly, with the Punch King Fitness system.