Under what conditions can a Body20 Franchise Agreement for any Studio in the Development Area be signed by an Affiliated Entity?
Body20 Franchise · 2025 FDDAnswer from 2025 FDD Document
At your request, the Franchise Agreement for any Studio in the Development Area may be signed by an Entity formed by you to develop and operate the Studio (an "Affiliated Entity") (and which Studio shall count as one of your Studios for the purpose of satisfying the Development Schedule), provided all of the following conditions are met: (a) you own at least 51% of the direct ownership interests in such Affiliated Entity; (b) the Affiliated Entity conducts no business other than the operation of one or more of the Studios; (c) we determine, in our sole discretion, the Affiliated Entity and all owners of a legal or beneficial ownership interest in the Affiliated Entity meet our then-current criteria for franchisees and franchisee owners; and (d) in addition to the guarantee requirements set forth in the applicable Franchise Agreement, you and all of your Owners sign a personal guarantee and agree to assume full and unconditional liability for, and agree to perform, all obligations, covenants and agreements contained in the Franchise Agreement.
Source: Item 23 — RECEIPT (FDD pages 74–251)
What This Means (2025 FDD)
According to Body20's 2025 Franchise Disclosure Document, a Franchise Agreement for a studio in the Development Area may be signed by an Affiliated Entity if certain conditions are met. An Affiliated Entity is defined as an entity formed by the franchisee to develop and operate the Studio, which will count towards fulfilling the Development Schedule.
For Body20 to allow an Affiliated Entity to sign the Franchise Agreement, the franchisee must own at least 51% of the direct ownership interests in the Affiliated Entity. Additionally, the Affiliated Entity must conduct no business other than operating one or more Body20 Studios. Body20 must also determine, in its sole discretion, that the Affiliated Entity and all owners of a legal or beneficial ownership interest in the Affiliated Entity meet Body20's then-current criteria for franchisees and franchisee owners.
Furthermore, the franchisee and all of their Owners must sign a personal guarantee and agree to assume full and unconditional liability for, and agree to perform, all obligations, covenants, and agreements contained in the Franchise Agreement. This is in addition to any guarantee requirements set forth in the applicable Franchise Agreement. This ensures that the franchisor has recourse to the original franchisee even if the business is operated through an affiliated entity.
These conditions ensure that Body20 maintains control over who operates its franchises and that the franchisee remains ultimately responsible for the performance of the franchise, even if it is operated through a separate legal entity. This arrangement allows for flexibility in structuring the business while protecting the franchisor's interests.