[Help] NDA (Non Disclosure Agreement) Advice Needed..

[Knocky's Nose]

No, I haven't done anything naughty with a film producer, politician or leading businessman before you ask...

May I ask the learned and educated on NSC for some advice on a Non-disclosure agreement?

Okay : January this year I was looking at a Franchise. It all started wonderfully, I was totally sold on the business, they asked me to sign an NDA before they gave me trading figures and business plans (which I did) - and it was all going swimmingly. I had several meetings, researched the business, met some people who would be key to the business and raised the required capital (pending a small business loan for the rest, but my credit rating is 999 and I've never had issues in the past).

Then, they went all vague on me, not responding to emails, not answering direct questions properly, basically freezing me out. At a meeting for potential franchisees in London I was asked 'not to mention which territory I'm interested in to anyone'... I hit it off with a chap and we got chatting - and it turned to where he was from, and which area he was interested in. Turns out this man with seven figures in the bank after selling his previous businesses was looking at MY franchise (and the area they had already agreed with me) and they clearly preferred him to me having already been in talks with him behind my back. So, they were just keeping me hanging on a string until he'd decided wether he fancied a punt on it. Nice. Classy. Thanks.

So, I stepped down and walked away. Not the start of a great relationship finding out you've been strung along.

This was around 6 Months ago, and after looking at a couple more (very different) businesses I keep gravitating back to this one (the concept of it, at least).

The NDA lasts for 5 years, as of January 2019 - but it only really refers to the confidential information I was given not being shared with third parties. I've actually deleted and shredded it all, so have none of it anyway - but (and my question), does an NDA form any kind of 'non-competition' agreement as I've been privy to the actual idea and concept, plus have been shown how the business can work, and grow?

The last thing I want to do is start going down this road, only to find out I'll have a lawsuit at the end of it....

Thanks in advance.

 

[Deleted member 2719]

No, I haven't done anything naughty with a film producer, politician or leading businessman before you ask...

May I ask the learned and educated on NSC for some advice on a Non-disclosure agreement?

Okay : January this year I was looking at a Franchise. It all started wonderfully, I was totally sold on the business, they asked me to sign an NDA before they gave me trading figures and business plans (which I did) - and it was all going swimmingly. I had several meetings, researched the business, met some people who would be key to the business and raised the required capital (pending a small business loan for the rest, but my credit rating is 999 and I've never had issues in the past).

Then, they went all vague on me, not responding to emails, not answering direct questions properly, basically freezing me out. At a meeting for potential franchisees in London I was asked 'not to mention which territory I'm interested in to anyone'... I hit it off with a chap and we got chatting - and it turned to where he was from, and which area he was interested in. Turns out this man with seven figures in the bank after selling his previous businesses was looking at MY franchise (and the area they had already agreed with me) and they clearly preferred him to me having already been in talks with him behind my back. So, they were just keeping me hanging on a string until he'd decided wether he fancied a punt on it. Nice. Classy. Thanks.

So, I stepped down and walked away. Not the start of a great relationship finding out you've been strung along.

This was around 6 Months ago, and after looking at a couple more (very different) businesses I keep gravitating back to this one (the concept of it, at least).

The NDA lasts for 5 years, as of January 2019 - but it only really refers to the confidential information I was given not being shared with third parties. I've actually deleted and shredded it all, so have none of it anyway - but (and my question), does an NDA form any kind of 'non-competition' agreement as I've been privy to the actual idea and concept, plus have been shown how the business can work, and grow?

The last thing I want to do is start going down this road, only to find out I'll have a lawsuit at the end of it....

Thanks in advance.

I can only give you my experience, I had franchise business and the franchisor sold up to someone.

Fortunately for me at the time the new franchisor said they only wanted me out of all the franchisees and they offered me a package I could not refuse, the wife was pregnant at the time so I took it.
They kept delaying my commission structure but said it would be put in place, it wasn't so 6 months down the line with the wife about to burst, I made the decision they were never going to make a structure, as they thought I would be happy with a good basic, car expenses etc.

Wrong, in my gut it didn't sit well, I left after giving them feedback and although I was not meant to sell any similar products or go on their patch, I did I had no alternative.

The result was another 6 years of keeping all my original business they got 1 customer out of 450 and ended up going out of business with this company.

They never ever bothered to legally come for me.

However you are in quite a different situation, can you slightly change the business idea/structure?

What is your attitude to risk?

 

[Westdene Seagull]

No, I haven't done anything naughty with a film producer, politician or leading businessman before you ask...

May I ask the learned and educated on NSC for some advice on a Non-disclosure agreement?

Okay : January this year I was looking at a Franchise. It all started wonderfully, I was totally sold on the business, they asked me to sign an NDA before they gave me trading figures and business plans (which I did) - and it was all going swimmingly. I had several meetings, researched the business, met some people who would be key to the business and raised the required capital (pending a small business loan for the rest, but my credit rating is 999 and I've never had issues in the past).

Then, they went all vague on me, not responding to emails, not answering direct questions properly, basically freezing me out. At a meeting for potential franchisees in London I was asked 'not to mention which territory I'm interested in to anyone'... I hit it off with a chap and we got chatting - and it turned to where he was from, and which area he was interested in. Turns out this man with seven figures in the bank after selling his previous businesses was looking at MY franchise (and the area they had already agreed with me) and they clearly preferred him to me having already been in talks with him behind my back. So, they were just keeping me hanging on a string until he'd decided wether he fancied a punt on it. Nice. Classy. Thanks.

So, I stepped down and walked away. Not the start of a great relationship finding out you've been strung along.

This was around 6 Months ago, and after looking at a couple more (very different) businesses I keep gravitating back to this one (the concept of it, at least).

The NDA lasts for 5 years, as of January 2019 - but it only really refers to the confidential information I was given not being shared with third parties. I've actually deleted and shredded it all, so have none of it anyway - but (and my question), does an NDA form any kind of 'non-competition' agreement as I've been privy to the actual idea and concept, plus have been shown how the business can work, and grow?

The last thing I want to do is start going down this road, only to find out I'll have a lawsuit at the end of it....

Thanks in advance.

Every NDA I've ever been involved in ( either for myself or the business ) has been around not talking about what has been discussed, or sometimes, never discussing with anyone anything dodgy that has been raised. It's never been about setting up in competition. And as it happens, while we're part of the EU ( yes, I know, but let's leave that for the OTHER thread ! ), even an NDA or contract can't prevent you from setting up as a competitor - all about restriction of trade.

 

[Knocky's Nose]

What is your attitude to risk?

Many thanks for your input.

Do you mean risk as in risk of getting sued, or risk as in setting up a new business?

I'd say 'averse' and 'as long as it's a calculated one!'

 

[rabbitmaddie]

I think you are broadly ok, but no two NDAs are the same, and it is really down to the wording. sorry, I appreciate that isn't very helpful, but I suggest you get a lawyer to take a quick look.

 

[nickjhs]

In answer to your question NO. You have signed an agreement not to disclose information, this has nothing to do with setting up your own business. Even if for some bizarre reason they decided to challenge you on this it would be laughed out of court. Unless of course there was a paragraph referring to you not being able to set up a similar business using the basic idea of their franchise model they had shown you, even then in this extreme scenario I would bet all I have that it would get laughed out of court. I have been involved with franchises, they cannot even stop you working in your area if they terminate you as it is a restriction of trade. One more thing people dont get, just because you sign something does not mean it is legally binding

 

[Westdene Seagull]

One more thing people dont get, just because you sign something does not mean it is legally binding

Indeed. Most employment contracts about not being able to work for a competitor for six months or poach other staff are completely unenforceable. Yet people still think they are. Good old Human Remains eh !

 

[Deleted member 2719]

Many thanks for your input.

Do you mean risk as in risk of getting sued, or risk as in setting up a new business?

I'd say 'averse' and 'as long as it's a calculated one!'

I think I would probably look into seeing if the franchisor has been in court before and if he is wealthy, then as long as you covered yourself as much as possible, go for it and make sure he regrets going with the other Franchisee!!
That's assuming you will have enough cash flow and you can match or better his costs and his service unless there is enough room for both of you on this patch.

 

[Hendrax]

Hire a decent solicitor.

 

[Knocky's Nose]

I think I would probably look into seeing if the franchisor has been in court before and if he is wealthy, then as long as you covered yourself as much as possible, go for it and make sure he regrets going with the other Franchisee!!
That's assuming you will have enough cash flow and you can match or better his costs and his service unless there is enough room for both of you on this patch.

That's the thing, the actual CEO and I got on really well. He was a lovely guy who I could (and still would) work with all day long.

However, he had nothing to do with Franchisee Recruitment. The actual guy in charge of Franchisee Recruitment was one of those arrogant types who tries to make you feel he's the centre of your planet and it's an honour just to be in his presence... After a month of no contact his excuse was 'the wife's mother was in hospital and it's been a very difficult time for me'. I think he expected me to say how sorry I was for him, and that putting my life on hold for a month was the very least I could do.. etc... He comes from a big, corporate background, and people are just there to be stepped on if they're not bigger than you.

[MENTION=26782]Hendrax[/MENTION] - I see your point on hiring a decent Solicitor, but I'm not at that stage yet. This is exploratory to see if I'm running down a blind alley, or wether consensus is that I have little or no case to answer.

The concept of the business is firmly in the public domain. The mechanics and processes are for all to see on their website. The only thing which worries me is that I've seen the figures, I've seen the business plan and the number, I've met some key people they want to deal with (introduced to me by them), and I've signed an NDA...

The question is, does an NDA handcuff me to a lamp-post - or can I start something pretty much identical in its concept (albeit with a different trading name and different terminologies) using the people they introduced me to. For clarity, as far as I'm aware up to this point, they haven't signed anything with this company. They were just in discussions.

 

[Goldstone1976]

While there are templates that many businesses use, and the vast majority of businesses will include clauses that attempt to achieve a variety of things, typically around confidentiality, I’ve yet to see identically worded NDAs. They are not intended to be used as non- compete contracts, but I have seen NDAs that say you won’t use information you have gained from them in competition with them. The onus for proving that fact lies with them, rather than you having to prove that you haven’t. It’s a civil matter, so any litigation would have to be proved on the balance of probabilities, not to the criminal standard.

I’m not a solicitor, but I’ve constructed about 50 NDAs in my career and signed many hundreds. I’d be happy to have a look if you wanted me to.

 

[Knocky's Nose]

Very kind.

PM Sent.

 

[CheeseRolls]

Is it another franchise you are looking to take on?

Is there any merit in discussing your situation with the new franchisee? On the face of it, I don't think you have too much to worry about.

I assume you have not gained financially through the discussions that you had, so the worst they can do is to threaten legal action to stop you from trading (not sure on what basis without understanding the specifics of the NDA). Having the support and assurance from the new franchisee could prove invaluable, springing it on them, once you are trading, may not gain the same response.

 

[Knocky's Nose]

No, it's going in to the same business I was interested in taking a franchise of - but self employed this time. I've been self-employed since I was 19 (I'm now fast approaching 50) so I'm not scared of starting anything myself. The Franchise concept appealed because it was a 'brand' of which many people are familiar, but a totally new area of business for them.

Basically, the brand name is just being whored out to anyone who wants to give a royalty. The excuse is 'we can start a brand family' - and it's currently in the let's throw it at the wall and see what sticks stage.

If I did go ahead with this, I'd be looking to ally with another national brand who are actually experts in this field. I'd be doing the same, but better - and with no Franchise Fee or big royalties to pay I could undercut them.

 

[Weststander]

In answer to your question NO. You have signed an agreement not to disclose information, this has nothing to do with setting up your own business. Even if for some bizarre reason they decided to challenge you on this it would be laughed out of court. Unless of course there was a paragraph referring to you not being able to set up a similar business using the basic idea of their franchise model they had shown you, even then in this extreme scenario I would bet all I have that it would get laughed out of court. I have been involved with franchises, they cannot even stop you working in your area if they terminate you as it is a restriction of trade. One more thing people dont get, just because you sign something does not mean it is legally binding

Excellent post, I agree with all your points.

I’d make a general comment that sometimes the larger party with deeper pockets, makes that bizarre decision to take legal action, sometimes out of spite. Knowing that the less wealthy party will go through much uncertainty and cost (even if they eventually are recompensed for costs).

I’ve seen this in employment law and partnership cases.

Bullying.

 

[father_and_son]

Typically the wording of an NDA would specifically preclude you using any information that is confidential... This would include all the figures and results but could also include any specific business ideas that were unique to them.

As soon as that information is in the public domain then it is not longer confidential, protected by the NDA and is fair game.

Provided the 'idea' is known and other franchises are operating elsewhere then you can go ahead.

No contract or NDA can restrict you from working, so most "non-compete" clauses are generally worthless. The only issue is if you use information that could not be known by any other means than from the documents they showed you.

EDIT: approach the companies/people you were introduced to through the normal channels (speak to reception/switchboard, not direct to the people you met). Again... Provided you use information in the public domain to get in the door, then you relationship with the people you meet is immaterial whoever made the initial introduction.

 

[NooBHA]

Many thanks for your input.

Do you mean risk as in risk of getting sued, or risk as in setting up a new business?

I'd say 'averse' and 'as long as it's a calculated one!'

You are at risk of being sued if you ''hijack'' their concept or ideas - That said ; however, if you become successful, using their concept fairly quickly. They would be just as likely to ''buy you out'' quickly rather than go through the Courts to sue you.

 

[Lethargic]

Another angle is to look at the confidential info itself, great saying you cannot disclose confidential info but did they make it clear what is confidential ?
You can't make a sweeping statement in an NDA about using confidential info that attempts to cover everything you heard or saw, its unenforceable so was it clearly marked as confidential and if neccessary could you prove it is/was not clearly marked?

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