Is a Red Wagon Club licensee allowed to divert business from any Businesses to any Competitive Business?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
8. Covenants.
- (a) Non-Competition. During the Term and for a period of 24 months after the expiration or termination of this Agreement, neither Licensee, its affiliates, nor any owner nor any member of the immediate family of Licensee or any owner, shall directly or indirectly:
- (i) have any interest as a disclosed or beneficial owner in any Competitive Business;
- (ii) perform services as a director, officer, manager, employee, consultant, lessor, representative, agent, or otherwise for any Competitive Business; or
- (iii) divert or attempt to divert any business or any customers of any Businesses to any Competitive Business.
- A "Competitive Business" means (1) any membership-based business that is affiliated with a law firm that provides non-legal services to clients or members (including, but not limited to, training, social events, and seminars); or (2) any businesses granting
franchises or licenses to others to operate the type of businesses specified in subparagraph (1).
Source: Item 23 — RECEIPTS (FDD pages 47–142)
What This Means (2024 FDD)
According to the 2024 Red Wagon Club Franchise Disclosure Document, a licensee is restricted from diverting business to a competitive business during the term of the agreement and for 24 months after its expiration or termination. The agreement specifies that the licensee, their affiliates, owners, or immediate family members of the licensee or any owner cannot directly or indirectly divert or attempt to divert any business or customers from any businesses to any Competitive Business.
A "Competitive Business" is defined as any membership-based business affiliated with a law firm that offers non-legal services such as training, social events, and seminars, or any business that grants franchises or licenses to others to operate similar businesses. This non-compete clause is designed to protect Red Wagon Club's market share and prevent licensees from using the knowledge and resources gained through the franchise to benefit a competing venture.
This restriction has significant implications for potential Red Wagon Club licensees. It limits their ability to engage in or be associated with any competing business during the agreement and for two years afterward. Licensees must carefully consider this restriction, especially if they have existing business interests or future plans that might conflict with the definition of a Competitive Business. The non-compete agreement aims to ensure that licensees remain fully committed to the Red Wagon Club system and do not exploit their association with the franchise to undermine its business.