Does the Alloy Franchise Agreement grant an exclusive territory to the franchisee?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 12: TERRITORY]
ITEM 12 TERRITORY
Franchise Agreement
The Franchise Agreement grants you the right to operate your Franchised Business only at the location we approve ("Authorized Location"). You will not receive an exclusive territory. You may face competition from other franchisees, from outlets we own, or from other channels of distribution or competitive brands that we control. However, we will grant you a protected area, which will be described in an exhibit to your Franchise Agreement ("Designated Area"). If your Designated Area is located in a suburban area, your Designated Area will include a population of at least 30,000 people, which for most suburban areas will cover a radius of approximately 2 miles from the Authorized Location (taking into account any geographic factors like rivers or other similar natural boundaries). We reserve the right to create a more limited Designated Area for Facilities located in densely populated areas but your Designated Area will have a population of at least 30,000 people. Your Designated Area may be described in terms of street boundaries or may be drawn on a map to be attached to your Franchise Agreement. We (and any affiliates) will not establish, nor allow another franchise owner to establish, another Franchised Business located within your Designated Area, although in certain instances there may be overlap of Designated Area boundaries of two franchisees. We do not anticipate permitting franchisees to establish
Facilities at captive market locations, such as a shopping mall, office building, or similar location. There are no circumstances under which we can modify the boundaries of your Designated Area during the term of your Franchise Agreement.
You must achieve a minimum level of Gross Sales annually to retain your territorial rights, as follows (there is no Minimum Annual Gross Sales for the period of time between signing your Franchise Agreement and the date you open):
| Year of Operation (beginning when you | ||
|---|---|---|
| open for business | ||
| Year 1 | $240,000 | |
| Year 2 and each subsequent year of operation | $300,000 | |
| through the initial term of your Franchise | ||
| Agreement |
[Item 12: TERRITORY]
We and our affiliates may sell products or offer services under the Proprietary Marks within and outside your Designated Territory through any method of distribution other than a dedicated Alloy Facility, including sales or web-based fitness instruction through channels of distribution such as the internet, catalog sales, telemarketing or other direct marketing sales (together, "alternative distribution channels"). You may not use alternative distribution channels to make sales outside or inside your Designated Territory and you will not receive any compensation for our sales through alternative distribution channels. We or one of our affiliates will fulfill all orders for merchandise placed through our website, and you will have no right to the revenue from these orders, even if the order originated from or was delivered to an address in your Designated Territory.
Area Development Agreement
If you enter into an Area Development Agreement, you will receive a Development Territory within which you will have certain rights to develop multiple Alloy Facilities. Although you will receive a Development Territory with certain protected rights to develop multiple Alloy Facilities, you will not receive an exclusive territory. You may face competition from other franchisees, from outlets we own, or from other channels of distribution or competitive brands that we control. The size of the Development Territory will depend on the number of Facilities you commit to develop, and may be described in terms of contiguous zip codes, street or county boundaries, or other similar methods, and may be depicted on a map. If you meet the Minimum Performance Schedule, comply with all other provisions described in the Area Development Agreement and otherwise comply with the provisions of each related Franchise Agreement, we will not establish or license others to establish a Facility within the Development Territory assigned to you. You maintain your rights to your Development Territory even if the population increases.
In addition, when you have signed a lease for the last Facility to be developed within the Development Territory, your exclusive rights under the Area Development Agreement with respect to the Development Territory will have expired and we and our affiliates will have the right to operate and to grant to others development rights and franchises to develop and operate Facilities within the Development Territory. This right will be subject only to the territorial rights under your franchise agreements for Facilities in the Development Territory.
Source: Item 12 — TERRITORY (FDD pages 42–46)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the Franchise Agreement does not grant an exclusive territory. Instead, Alloy grants a protected area referred to as a "Designated Area" to franchisees. This Designated Area will be described in an exhibit to the Franchise Agreement. For suburban locations, the Designated Area will include a population of at least 30,000 people, typically covering a radius of approximately 2 miles from the Authorized Location, while taking into account geographic boundaries. Alloy reserves the right to create a more limited Designated Area for Facilities in densely populated areas, but it will still have a population of at least 30,000 people. Alloy will not establish or allow another franchise owner to establish another Franchised Business within the franchisee's Designated Area. However, there may be overlap of Designated Area boundaries of two franchisees. Alloy does not anticipate permitting franchisees to establish Facilities at captive market locations, such as a shopping mall, office building, or similar location.
Even within the Designated Area, franchisees may face competition from other franchisees, outlets owned by Alloy, other distribution channels, or competitive brands controlled by Alloy. Alloy and its affiliates retain the right to sell products or offer services under the Proprietary Marks within and outside the Designated Territory through methods other than a dedicated Alloy Facility, including online sales and direct marketing. Franchisees will not receive compensation for sales made through these alternative distribution channels, even if the order originated from or was delivered to an address within their Designated Territory.
To maintain territorial rights, Alloy franchisees must achieve a minimum level of Gross Sales annually. For the first year of operation, the minimum annual Gross Sales is $240,000. In the second year and each subsequent year of operation through the initial term of the Franchise Agreement, the minimum annual Gross Sales is $300,000. Failure to meet these minimums can result in additional training at the franchisee's expense, and repeated failure can lead to termination of the Franchise Agreement. Franchisees must also cover any shortfall of royalty fees for each failure to achieve the minimum annual Gross Sales.
Alloy also offers Area Development Agreements, which grant a Development Territory for developing multiple Alloy Facilities. While this provides certain protected rights to develop multiple locations, it does not constitute an exclusive territory. Franchisees operating under an Area Development Agreement may still face competition from other franchisees, company-owned outlets, other distribution channels, or competitive brands controlled by Alloy. Once a franchisee has signed a lease for the last Facility to be developed within the Development Territory, their exclusive rights under the Area Development Agreement expire, and Alloy and its affiliates can operate or grant others the right to operate Facilities within the Development Territory, subject to the territorial rights under the individual franchise agreements.