Does the non-competition agreement for Red Wagon Club extend to the licensee's affiliates?
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
Source: Item 23 — RECEIPTS (FDD pages 47–142)
What This Means (2024 FDD)
According to the 2024 Red Wagon Club Franchise Disclosure Document, the non-competition agreement extends to the licensee's affiliates. During the term of the agreement and for 24 months after its expiration or termination, the licensee, its affiliates, owners, and immediate family members of the licensee or any owner are restricted from engaging in certain competitive activities.
Specifically, these parties are prohibited from having any ownership interest in a Competitive Business, performing services for a Competitive Business as a director, officer, manager, employee, consultant, lessor, representative, or agent, 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 that grants franchises or licenses to others to operate similar businesses.
This non-compete clause is broad, covering not only the licensee but also their affiliates and family members, which is a fairly standard practice in franchising to protect the franchisor's business model and market. The restriction lasts for 24 months after the agreement ends, which is a significant period that could impact the licensee's future business opportunities. A prospective Red Wagon Club licensee should carefully consider these restrictions and how they might affect their long-term business plans.