factual

What is Spray Net's recourse if a franchisee threatens to breach the non-competition agreement?

Spray_Net Franchise · 2025 FDD

Answer from 2025 FDD Document

Y. IF FRANCHISEE IS AN INDIVIDUAL AND FRANCHISEE'S SPOUSE HAS NOT SIGNED THE FRANCHISE AGREEMENT DIRECTLY, THEN FRANCHISEE'S SPOUSE MUST EXECUTE THIS FORM OF PERSONAL GUARANTY.

ARTICLE I PERSONAL GUARANTY

The undersigned persons (individually and collectively "you") hereby represent to SPRAY-NET INC. (the "Franchisor") that you are all the owners/principals/members/shareholders/managers/partners, as applicable, of the business entity named (the "Franchisee"), as well as their respective spouses, as of the date this Personal Guaranty (the "Personal Guaranty" or "Guaranty") is executed.

In consideration of the grant by Franchisor to the Franchisee as herein provided, each of you hereby agree, in consideration of benefits received and to be received by each of you, jointly and severally, and for yourselves, your heirs, legal representatives and assigns, to be firmly bound by all of the terms, provisions and conditions of the foregoing SPRAY-NET Franchise Agreement, and any other agreement between Franchisee and Franchisor and/or its affiliates, and do hereby unconditionally guarantee the full and timely performance by Franchisee of each and every obligation of Franchisee under the aforesaid Franchise Agreement or other agreement between Franchisor and Franchisee, including, without limitation: (i) any indebtedness of Franchisee arising under or by virtue of the aforesaid Franchise Agreement; (ii) the prohibition of any change in the percentage of Franchisee owned, directly or indirectly, by any person, without first obtaining the written consent of Franchisor prior to said proposed transfer as set forth in the Franchise Agreement; (iii) those obligations related to confidentiality, non-disclosure and indemnification; and (iv) the in-term and post-term covenants against competition, as well as all other restrictive covenants set forth in the Franchise Agreement.

ARTICLE II CONFIDENTIALITY

During the initial and any renewal terms of the Franchise Agreement and this Guaranty, you will receive information, which Franchisor considers to be Confidential Information, trade secrets and/or confidential information, including without limitation: (i) site-selection criteria; (ii) methods, techniques and trade secrets for use in connection with the proprietary business operating system that Franchisor and its affiliates have developed (the "System")forthe establishment and operation of a SPRAY-NET business(each, an "Franchised Business") and/or franchise (each, a "Franchised Business"); (iii) marketing research and promotional, marketing and advertising programs for the Franchised Business; (iv) knowledge of specification for and suppliers of, certain products, fixtures, furnishings, equipment and inventory used at the Franchised Business (v) knowledge of the operating results and financial performance of other Franchised Businesses; (vi) customer communication and retention programs, along with data used or generated in connection with those programs; (vii) Franchisor's proprietary Manuals and other instructional manuals, as well as any training materials and information Franchisor has developed for use in connection with the System; (viii) information regarding the development of Franchisor's proprietary marks (the "Proprietary Marks"); (ix) information generated by, or used or developed in, an Franchised Business's

operation, including client names, properties and contracts of any kind, addresses, telephone numbers and related information and any other information contained in the Franchised Business's computer system or proprietary software system;

Source: Item 23 — RECEIPTS (FDD pages 75–219)

What This Means (2025 FDD)

According to Spray Net's 2025 Franchise Disclosure Document, if a franchisee threatens to breach the non-competition agreement, the franchisor can seek legal remedies. Specifically, the franchisee is bound by the in-term and post-term covenants against competition, as well as all other restrictive covenants set forth in the Franchise Agreement. This obligation is part of the agreement between the franchisee and Spray Net.

Furthermore, if the franchisee is in default of the agreement under Section 6(Z), Spray Net has the option to reduce the size of the franchisee's designated territory and operate or license others to operate additional Spray Net businesses within the original territory. Spray Net will provide written notice to the franchisee, who then has ten calendar days to execute an addendum detailing the revised territory boundaries or the termination of exclusive rights. Failure to execute this addendum within the specified time allows Spray Net to immediately terminate the agreement upon notice.

In addition to termination rights, Spray Net has the right to enter the premises and take complete authority over the operation of the franchised business if the agreement is subject to termination due to the franchisee's failure to cure any default within the applicable time period. This "step-in right" allows Spray Net to manage the business until the defaults are cured and the franchisee complies with the agreement terms.

It is important to note that in Minnesota, the franchisee cannot consent to Spray Net obtaining injunctive relief, although Spray Net may seek it. A court will determine if a bond is required. These measures collectively ensure that Spray Net has several avenues to protect its interests and enforce the non-competition agreement, ranging from territory reduction and business operation control to potential legal action.

Disclaimer: This information is extracted from the 2025 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.