Is a Spray Net franchisee permitted to lend money 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.
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- For a period of two (2) years after the expiration and nonrenewal, transfer or termination of this 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.
Source: Item 23 — RECEIPTS (FDD pages 75–219)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, franchisees face restrictions on lending money to competing businesses both during and after the term of their franchise agreement. During the franchise term, franchisees (including their principals, owners, guarantors, and immediate family) are prohibited from lending money to any business that offers products or services similar to Spray Net's, such as painting or coating exterior surfaces, or that licenses or franchises competing businesses. There are two exceptions to this rule: operating a Spray Net franchise under a valid agreement with the franchisor, or owning less than 2% of the interests in a publicly traded company. This restriction is in place to protect Spray Net's market position and prevent franchisees from supporting competing ventures that could undermine the brand.
After the franchise agreement expires, is not renewed, or is terminated, the restrictions continue for a period of two years. During this post-term period, franchisees and related parties are barred from lending money to a Competing Business. This restriction applies within the franchisee's Designated Territory, within a 50-mile radius of that territory, within a 50-mile radius of any Spray-Net franchised business that is open and operating, and within a 50-mile radius of any other designated territory granted by Spray Net.
These non-compete clauses are typical in franchising to protect the brand and prevent franchisees from using the franchisor's confidential information and business model to benefit a competitor. Prospective Spray Net franchisees should carefully consider these restrictions, as they could limit their future business opportunities both during and after the franchise term. Franchisees should seek legal counsel to fully understand the scope and implications of these non-compete provisions before signing the franchise agreement.