What constitutes a violation of the in-term covenant not to compete for a Spray Net franchisee?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
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- During the Term of the Franchise Agreement and this Guaranty. During the term of the Franchise Agreement and this Personal Guaranty, each of the undersigned may not, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any other person, partnership or corporation:
- 1.1. Own, maintain, engage in, be employed or serve as an officer, director, or principal of, lend money, lease space or extend credit to (or otherwise have any interest in or involvement with), any other business that offers, provides, manufactures, distributes, or sells any kind of products and services in connection with any 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 the Franchise 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"); and/or (ii) offers or grants licenses or franchises, or establishesjoint ventures, for the ownership or operation of a Competing Business; provided, however, that this Sectiondoes not apply to your operation of an SPRAY-NET franchise under a valid franchise agreement withFranchisor, or your ownership of less than two percent (2%) of the interests in a publicly traded company;
- 1.2. 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 Divert or attempt to divert business or customers of any Franchisee-owned Franchised Businesses to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or
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 Franchise Agreement and Personal Guaranty, franchisees and their owners/principals are restricted from engaging in activities that compete with Spray Net. This includes owning, maintaining, or being involved with any other business that offers similar products or services, such as painting or coating the exterior of structures, or businesses that offer or grant licenses or franchises for similar competing businesses. However, this restriction does not apply to the franchisee's operation of a Spray Net franchise under a valid agreement or ownership of less than 2% of interests in a publicly traded company.
Specifically, the in-term covenant not to compete prohibits franchisees from being employed by, serving as an officer, director, or principal of, lending money to, leasing space to, or extending credit to any competing business. The definition of a "Competing Business" includes those that offer products or services related to painting (spray-painting or traditional) and/or coating exteriors of structures like homes and buildings, as well as any business offering Approved Products, Approved Services, and Ancillary Services similar to those offered by Spray Net franchises.
Additionally, franchisees are prohibited from employing or attempting to employ individuals currently working for Spray Net, its affiliates, or other Spray Net franchisees. They also cannot divert or attempt to divert business or customers from any franchisee-owned Spray Net businesses to competitors through direct or indirect means. Any action that is injurious or prejudicial to the goodwill associated with Spray Net's Proprietary Marks or the System is also considered a violation of the in-term covenant not to compete. These restrictions are designed to protect Spray Net's market position and the integrity of its franchise system during the term of the agreement.