Is a Red Wagon Club licensee prohibited from being a consultant for a Competitive Business after the agreement terminates?
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 FDD, a licensee is restricted from acting as a consultant for a Competitive Business for a specified period after the agreement ends. Specifically, during the term of the License Agreement and for 24 months after the agreement's expiration or termination, the licensee, their affiliates, owners, or immediate family members of the licensee or any owner are prohibited from performing services as a consultant for any Competitive Business, either directly or indirectly.
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 restriction is designed to protect Red Wagon Club's business model and market position by preventing licensees from leveraging their knowledge and experience gained during the agreement to benefit a competing entity.
This non-compete clause has significant implications for potential Red Wagon Club licensees. It limits their ability to engage in similar business activities for two years after the agreement ends, which could affect their income and career options. Licensees should carefully consider this restriction and evaluate its potential impact on their future plans before entering into an agreement with Red Wagon Club. It is also important to understand the definition of a "Competitive Business" to ensure compliance with the terms of the agreement.