What is the scope of the non-competition agreement for Punch King Fitness franchisees in terms of business activities?
Punch_King_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
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 Punch King Fitness's 2024 Franchise Disclosure Document, the non-competition agreement restricts franchisees from engaging in specific business activities during the term of the franchise agreement and for a period after its expiration or termination. Specifically, the franchisee is prohibited from owning, maintaining, operating, engaging in, or having any interest in any business offering boxing and kickboxing or any other products or services that have been offered by the franchised business.
This restriction applies for two years following the expiration or termination of the Franchise Agreement, regardless of the reason for termination. The geographic scope of this restriction extends to within twenty-five (25) miles of any Punch King Fitness Franchised Business. However, the restriction does not apply to the beneficial ownership 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.
If a franchisee violates this non-competition provision after the expiration, termination, or assignment of the Franchise Agreement, the period during which they must comply with the obligation will be extended to two years after they cease breaching the obligation. This clause aims to protect Punch King Fitness's market and confidential information by preventing former franchisees from directly competing using the brand's methods and knowledge within a specific area and timeframe.