Does the Restrictive Covenant Agreement for a Punch King Fitness franchise include a non-compete clause?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
- **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)
Yes, according to the 2024 Punch King Fitness Franchise Disclosure Document, the Restrictive Covenant Agreement includes a non-compete clause. This clause restricts franchisees (referred to as 'Covenantor') from engaging in competitive business activities during the term of the Franchise Agreement and for a period after the agreement expires or terminates.
Specifically, the franchisee is prohibited from owning, maintaining, operating, or having any interest in a business offering boxing and kickboxing or any other products or services offered by the Punch King Fitness franchise. This restriction applies within a 25-mile radius of any Punch King Fitness franchised business. The non-compete period extends for two years after the termination or expiration of the Franchise Agreement. If the franchisee violates this provision, the restricted period will be extended for two years after the breach ceases.
However, there is an exception: the restriction does not apply to the beneficial ownership of less than 5% of the outstanding equity securities of any corporation registered under the Securities and Exchange Act of 1934. This means a franchisee can own a small stake in a publicly traded company that might have some competitive business activities without violating the non-compete agreement. These non-compete terms are typical in franchising to protect the brand and other franchisees in the system.