Does the Spray Net agreement prohibit a franchisee from leasing space to a Competing Business?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
bligations under, this Agreement in Franchisor's sole discretion.
14. COVENANTS
Franchisee acknowledges that, as a participant in Franchisor's System, Franchisee will receive proprietary and confidential information and materials, trade secrets, and the unique methods, procedures and techniques that Franchisor has developed. As such, Franchisee agrees to the covenants in this Section to protect Franchisor, the System, Proprietary Marks and Franchisor's other franchisees.
A. During the Term of this Agreement. During the term of this Agreement, neither Franchisee, its principals, owners, guarantors or Designated Manager(s), nor any immediate family of Franchisee, its principals, owners, guarantors or Designated Manager(s), may, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any other person, partnership or corporation:
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- Own, maintain, engage in, be employed or serve as an officer, director, or principal of, lend money or extend credit to, lease/sublease space to, or have any interest in or involvement with, any other business that: (i) offers, provides or sells products or services in connection with (a) the painting (spray-painting or traditional),and/or coating of exterior covering of doors, windows, roofs, and sidings of immovable structures including homes and other buildings, and (b) any kind of the Approved Products, Approved Services, and the Ancillary Services (as these terms are defined in this Agreement and as may be modified by Franchisor from time to time) that are offered or provided by the Franchised Business and/or other Businesses (each, a "Competing Business"); or (ii) offers or grants licenses or franchises, or establishes joint ventures, for the ownership or operation of a Competing Business. For purposes of this Agreement, a Competing Business does not include: (y) any business operated by Franchisee under a Franchise Agreement with Franchisor; or (z) any business operated by a publicly-traded entity in which Franchisee owns less than two percent (2%) legal or beneficial interest;
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- Subject to and as permitted by applicable law, employ or seek to employ any person who is at that time employed by Franchisor, Franchisor's affiliates or any other System franchisee, or otherwise directly or indirectly induce or seek to induce such person to leave his or her employment thereat; or
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- Divert, or attempt to divert, any prospective customer to a Competing Business in any manner.
B. After the Term of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 75–219)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, during the term of the agreement, a franchisee is restricted from leasing or subleasing space to any business deemed a "Competing Business." A Competing Business is defined as one that offers or sells products or services related to painting, coating of exterior surfaces, or any of the Approved Products, Approved Services, and Ancillary Services that Spray Net provides. This restriction applies to the franchisee, their principals, owners, guarantors, designated managers, and their immediate family members.
This restriction aims to prevent franchisees from supporting or enabling businesses that directly compete with Spray Net. However, there are exceptions: franchisees are allowed to operate a business under a franchise agreement with Spray Net, or own less than 2% of the interests in a publicly-traded company. This ensures that franchisees remain focused on developing their Spray Net franchise and do not divert resources or support to competing ventures.
After the termination of the franchise agreement, the restrictions on leasing space to a Competing Business continue for a period of two years. During this period, the franchisee, along with their principals, owners, guarantors, and immediate family members, are prohibited from leasing or subleasing space to a Competing Business within the Designated Territory, within a 50-mile radius of the Designated Territory, within a 50-mile radius of any Spray-Net franchised business that is open and operating, or within a 50-mile radius of any other designated territory that has been granted by Spray Net. This extended restriction is designed to protect Spray Net's market share and prevent former franchisees from leveraging their knowledge and resources to support competing businesses in areas where Spray Net operates.