Is a Red Wagon Club licensee's immediate family also subject to the non-competition agreement?
Red_Wagon_Club Franchise · 2024 FDDAnswer from 2024 FDD Document
- (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, the non-competition covenant extends to the licensee, their affiliates, owners, and members of the immediate family of the licensee or any owner. This means that during the term of the License Agreement and for 24 months after its expiration or termination, these individuals and entities are restricted from engaging in certain competitive activities.
The non-competition agreement specifically prohibits having any interest in a Competitive Business, performing services for a Competitive Business, or diverting business or customers to a Competitive Business. A Competitive Business is defined as any membership-based business affiliated with a law firm that provides non-legal services, such as training, social events, and seminars, or any business granting franchises or licenses to operate such businesses.
This provision is designed to protect Red Wagon Club's market position and proprietary business model by preventing those with close ties to the licensee from leveraging inside knowledge to compete against the franchise. Prospective Red Wagon Club licensees should carefully consider the implications of this extended non-competition clause, especially if family members are involved in similar or potentially competitive businesses. It is important to fully understand the scope of the restrictions and how they might impact family members' professional activities during and after the term of the License Agreement.