After the Spray Net Franchise Agreement expires, can the franchisee have any involvement with a competing business within the Designated Territory?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
- 2.1 For a period of two (2) years after the expiration and nonrenewal, transfer or termination of the Franchise Agreement, regardless of the cause, neither Franchisee, its principals, owners and guarantors, nor any member of the immediate family of Franchisee, its principals, owners or guarantors, may, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any other person, partnership or corporation, be involved with any business that competes in whole or in part with Franchisor by offering or granting licenses or franchises, or establishing joint ventures, for the ownership or operation of a Competing Business.
The geographic scope of the covenant contained in this Section is any location where Franchisor can demonstrate it has offered or sold franchises as of the date the Franchise Agreement is terminated or expires.
2.2 For a period of two (2) years after the expiration and nonrenewal, transfer or termination of the Franchise Agreement, regardless of the cause, neither Franchisee, its principals, owners and guarantors, nor any member of the immediate family of Franchisee, its principals, owners or guarantors, may, directly or indirectly, for themselves or through, on behalf of, or in conjunction with any other person, partnership or corporation:
2.2.1 Own, maintain, engage in, be employed as an officer, director, or principal of, lend money to, extend credit to, lease/sublease space to, or have any interest in or involvement with any other Competing Business:
(i) within the Designated Territory or Additional Territory;
(ii) within a fifty (50) mile radius of the Designated Territory or Additional Territory;
(iii) within a fifty (50) mile radius of any Franchised Business that is open or under development as of the date the Franchise Agreement expires and/or is terminated; or
Source: Item 23 — RECEIPTS (FDD pages 75–219)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, for a period of two years after the expiration, nonrenewal, transfer, or termination of the Franchise Agreement, the franchisee faces certain restrictions regarding involvement with competing businesses. This applies regardless of the cause of termination. Specifically, the franchisee, their principals, owners, guarantors, and their immediate family members are restricted from being involved with any business that competes with Spray Net by offering or granting licenses or franchises, or establishing joint ventures for the ownership or operation of a Competing Business. This restriction applies to any location where Spray Net can demonstrate it has offered or sold franchises as of the termination or expiration date.
Additionally, for the same two-year period following the end of the agreement, the franchisee and related parties are prohibited from owning, maintaining, engaging in, or being employed by a Competing Business. They cannot serve as an officer, director, or principal of such a business, nor can they lend money to, extend credit to, or lease space to a Competing Business. This non-compete clause is specifically in effect within the Designated Territory, within a fifty (50) mile radius of the Designated Territory, within a fifty (50) mile radius of any Spray-Net franchised business that is open and operating, or within a fifty (50) mile radius of any other designated territory granted by Spray Net.
These restrictions are designed to protect Spray Net's business interests and prevent former franchisees from leveraging their knowledge and experience gained during the franchise term to directly compete with the Spray Net system. Prospective franchisees should carefully consider the implications of these post-term restrictions, especially if they anticipate wanting to remain in the same industry after the franchise agreement ends. It is important to understand the geographic scope and the types of activities that are prohibited to avoid potential legal issues in the future.