What are 'Approved Affiliates' in the context of a Big Blue Swim School franchise?
Big_Blue_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
We also may grant multi-unit development rights to qualified franchisees, which then may develop a specific number of BIG BLUE Swim Schools within distinct geographical development
areas encompassed within a larger protected territory according to a pre-determined, mandatory development schedule. Those franchisees may open and operate their BIG BLUE Swim Schools directly or through "Approved Affiliates," which are entities whose majority ownership is owned and controlled by you or your owners. Our Development Rights Agreement (Exhibit C), which we also reference as "DRA," governs a franchisee's multi-unit development rights and obligations. If you sign a Development Rights Agreement, you (or your Approved Affiliate) also will sign a Franchise Agreement for your first BIG BLUE Swim School at the same time.
Franchisees signing our DRAs must sign our then-current form of Franchise Agreement for each additional BIG BLUE Swim School they develop under the DRA. While that form may differ substantially and materially year to year from the first Franchise Agreement they sign for their first BIG BLUE Swim School to be developed (our current version of Franchise Agreement is disclosed in this disclosure document), we commit to charge during the initial franchise term for each BIG BLUE Swim School you develop under the DRA the same Royalty, Brand Fund contribution, Software License Fee, Local Marketing Spending Requirement, and minimum required Market Introduction Program expense we charge you under the first Franchise Agreement you sign. However, if, when the next franchise agreement is signed, you and your Approved Affiliates are in default under the DRA or any franchise agreement then in effect with us for a BIG BLUE Swim School, then the amounts of these fees and payments will remain as specified under our then-current form of franchise agreement.
Source: Item 1 — THE FRANCHISOR, AND ANY PARENTS, PREDECESSORS, AND AFFILIATES (FDD pages 8–11)
What This Means (2025 FDD)
According to Big Blue Swim School's 2025 Franchise Disclosure Document, 'Approved Affiliates' are entities through which multi-unit franchisees can operate their swim schools. Specifically, these affiliates must be majority-owned and controlled by the franchisee or the franchisee's owners. This structure is relevant for franchisees who obtain multi-unit development rights, allowing them to expand their Big Blue Swim School presence within a defined territory. The Development Rights Agreement (DRA) governs the franchisee's development rights and obligations. If a franchisee signs a DRA, they (or their Approved Affiliate) will also sign a Franchise Agreement for their first Big Blue Swim School.
This arrangement provides flexibility for multi-unit franchisees, allowing them to structure their business operations through separate legal entities while maintaining control. This can be useful for managing risk, optimizing tax strategies, or facilitating internal organization. However, it's crucial to note that the franchisee retains ultimate responsibility for the performance of the Approved Affiliate and compliance with the Franchise Agreement and DRA. Any default by the Approved Affiliate under the DRA or any franchise agreement in effect with Big Blue Swim School can impact the fees and payments required under subsequent franchise agreements.
For prospective multi-unit franchisees, understanding the implications of using Approved Affiliates is essential. It is important to carefully review the Development Rights Agreement and Franchise Agreement to fully grasp the obligations and potential liabilities associated with this structure. Franchisees should also consult with legal and financial advisors to determine the most appropriate business structure for their specific circumstances and to ensure compliance with all applicable laws and regulations. The franchisor commits to charging the same Royalty, Brand Fund contribution, Software License Fee, Local Marketing Spending Requirement, and minimum required Market Introduction Program expense under the first Franchise Agreement, unless the franchisee or their affiliates are in default.