Does the non-compete covenant in the Punch King Fitness agreement survive the expiration, termination, or cancellation of the agreement?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
r franchisee of Franchisor to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System; or
- 2. own, maintain, engage in, or have any interest in any business offering boxing and kickboxing or any other products or services that are offered in the Franchised Business ("Competitive Business"), unless otherwise consented to in writing by Franchisor.
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)
years after Franchisee is no longer in breach of such obligation.
D.Exclusion for Publicly Traded Company
This Section shall not apply to the beneficial ownership by Franchisee of less than five percent (5%) of the outstanding equity securities of any corporation that is registered under the Securities and Exchange Act of 1934.
E. Independent Covenants; Severability
The parties agree that each of the covenants in this Section shall be construed as independent of any other covenant or provision of this Agreement. If all or any portion of a covenant in this Section is held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which Franchisor is a party, Franchisee expressly agrees to be bound by any lesser covenants subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenants were separately stated in and made a part of this Section.
**F.
Source: Item 22 — CONTRACTS (FDD pages 56–215)
What This Means (2024 FDD)
According to Punch King Fitness's 2024 Franchise Disclosure Document, the non-compete covenants within both the Franchise Agreement and the Covenant Agreement survive the expiration, termination, or cancellation of the agreement. Specifically, the Franchise Agreement states that the franchisee is restricted from engaging in a competitive business for two years after the agreement's expiration, termination, or cancellation. This restriction includes owning, operating, or having an interest in a business offering boxing and kickboxing or similar services within 25 miles of any Punch King Fitness location, as well as soliciting clients of the franchised business.
The Franchise Agreement explicitly states that these covenants survive the termination, expiration, or cancellation of the agreement. Furthermore, if the franchisee violates the non-compete agreement after the termination or expiration, the period during which they must comply with the obligation is extended by two years from the date they cease the breach.
Similarly, the Covenant Agreement also contains non-compete provisions that extend beyond the term of the Franchise Agreement. The covenantor (which may be the franchisee or another individual associated with the franchise) is prohibited from engaging in a competitive business within 25 miles of a Punch King Fitness location for two years following the termination or expiration of the Franchise Agreement. This restriction does not apply if the covenantor owns less than 5% of the equity securities of a publicly traded company. The Covenant Agreement also specifies that violating these terms will result in irreparable injury to Punch King Fitness, allowing them to seek injunctive relief and recover legal costs.