Will an Alloy franchisee face competition from other franchisees?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
ating or reverse engineering the Alloy App in any manner.
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 | Minimum Annual Gross Sales | |---|---|---| | | 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 | | | We reserve the right, based on an individual franchisee's circumstances, to reduce or modify the minimum annual Gross Sales that a franchisee must achieve, although we will not increase the minimum annual Gross Sales without your consent. If we do this, we are not required to grant you a similar modification.
If you fail to achieve the minimum annual Gross Sales a first time, you must receive additional on-site training and assistance from one of our representatives, at your expense (including payment of our then-current per diem fee plus reimbursement of our representative's expenses). If you fail to achieve the minimum annual Gross Sales a second time, we may again require you to receive additional on-site training and assistance. If you fail to achieve the minimum annual Gross Sales a third time, we may terminate your Franchise Agreement without giving you the opportunity to cure the default. You must pay any shortfall of royalty fees for each failure to achieve the minimum annual Gross Sales.
During the term of the Franchise Agreement, we (and any affiliates that we periodically might have) have the right:
- (1) to establish and operate, and grant rights to other franchise owners to establish and operate, Facilities or similar businesses at any locations outside your Designated Territory and on any terms and conditions we deem appropriate;
- (2) merge with, acquire or become associated with ("Merger/Acquisition Activity") any businesses or facilities of any kind (including those in competition with ALLOY) under other systems and/or marks, which businesses and facilities may convert to or operate under the Marks and may offer or sell training services or related products that are the same as or similar to the services or products offered at or from the Franchised Business, and which may be located anywhere;
Source: Item 12 — TERRITORY (FDD pages 42–46)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, franchisees may face competition from various sources. For those entering into a standard Franchise Agreement, Alloy does not grant an exclusive territory. This means a franchisee may face competition from other franchisees, from outlets Alloy owns, or from other distribution channels or competitive brands that Alloy controls. However, Alloy will grant a protected area, referred to as a Designated Area, which will be outlined in an exhibit to the Franchise Agreement. For suburban locations, this Designated Area will include a population of at least 30,000 people, typically covering a radius of approximately 2 miles from the Authorized Location. Alloy commits to not establishing, nor allowing another franchisee to establish, another franchised business within this Designated Area, although there may be some overlap in Designated Area boundaries between franchisees.
For franchisees who enter into an Area Development Agreement, they will receive a Development Territory within which they have rights to develop multiple Alloy facilities. However, similar to the standard Franchise Agreement, this Development Territory is not exclusive, meaning these franchisees may also face competition from other franchisees, from outlets Alloy owns, or from other channels of distribution or competitive brands that Alloy controls. To maintain rights under the Area Development Agreement, the franchisee must adhere to a Minimum Performance Schedule, opening and operating a cumulative number of facilities by specific dates. Failure to meet this schedule may result in a loss of territorial exclusivity or termination of the Area Development Agreement.
Alloy also retains the right to operate and grant others the right to operate facilities outside the Development Territory, regardless of their proximity to a franchisee's facilities. They can also acquire and operate fitness businesses within a franchisee's Development Territory, as long as these businesses do not operate under Alloy's Proprietary Marks. Furthermore, Alloy has the right to develop or franchise Special Site locations, such as military bases, airports, business locations, college campuses, malls, and community events, regardless of their location and proximity to a franchisee's facility. These factors highlight the importance of carefully evaluating the specific terms and conditions outlined in the Franchise Agreement and Area Development Agreement to fully understand the potential competitive landscape.