For how long after the expiration or termination of the Red Wagon Club agreement is the licensee subject to non-competition restrictions?
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).
- (b) Non-Disparagement.
During and after the Term, Licensee agrees not to, and to cause Licensee's current and former owners, officers, directors, employees, representatives, affiliates, successors, assigns not to disparage or otherwise speak or write negatively, directly or indirectly, of Franchisee, Franchisor, the Brand, Franchisor's franchisees and licensees, and each of the foregoing entity's owners, directors, managers, officers, employees, or representatives, or take any other action which would, directly or indirectly, subject any of the foregoing to defame, ridicule, scandal, reproach, scorn, or indignity, or which would negatively impact or injure the goodwill of the foregoing.
- (c) Non-Interference.
During and for a period of 12 months after the Term, Licensee agrees not to, and to cause each of Licensee's current and former owners, officers, directors, principals, agents, partners, employees, representatives, affiliates, successors or assigns not to interfere or attempt to interfere with Franchisor's or its affiliates' relationship with any of its franchisees, licensees, lenders, vendors, consultants, or clients.
Source: Item 23 — RECEIPTS (FDD pages 47–142)
What This Means (2024 FDD)
According to the 2024 Red Wagon Club FDD, the licensee is subject to a non-competition covenant for 24 months after the expiration or termination of the agreement. During this period, the licensee, its affiliates, owners, and their immediate family members are restricted from 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 others to operate such businesses.
This non-competition clause prevents former Red Wagon Club licensees from directly competing with the franchisor or its franchisees for a defined period after their agreement ends. This is a standard practice in franchising to protect the brand's market share and confidential business information. The restrictions apply broadly to the licensee and related parties, ensuring that they cannot circumvent the agreement through other entities or family members.
In addition to the non-competition covenant, the licensee also agrees to a non-disparagement clause during and after the term, preventing them from speaking negatively about Red Wagon Club, its franchisees, or related parties. There is also a non-interference clause that extends for 12 months after the term, preventing the licensee from interfering with Red Wagon Club's relationships with its franchisees, licensees, vendors, or clients. These clauses collectively aim to protect Red Wagon Club's business interests and reputation beyond the term of the agreement.