After the Fitstop agreement terminates, what is the geographic radius around the Premises where a franchisee cannot operate a similar business without consent?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.3.3 Without our prior written consent, you shall not, directly or indirectly, engage in, acquire any financial or beneficial interest (including interests in corporations, partnerships, trusts, unincorporated associations, or joint ventures) in, or become a landlord for any business, which is similar to the Franchised Business, from a physical location within 25 miles of (a) the Premises, (b) the perimeter of the Designated Territory, or (c) the location of any other System Business that is open or under development as of the date this Agreement is terminated or expires, except that the Parties agree and acknowledge that this covenant shall not be applicable to ownership of less than 2% of the shares of a company whose shares are listed and traded on a national or regional securities exchange by Franchise or any Franchise Owner;
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, after the franchise agreement terminates or expires, a franchisee is restricted from engaging in any similar business to Fitstop without prior written consent. This restriction applies to any physical location within 25 miles of (a) the former Fitstop Premises, (b) the perimeter of the Designated Territory, or (c) the location of any other Fitstop that is open or under development as of the date the Agreement is terminated or expires. However, this covenant does not apply to ownership of less than 2% of the shares of a company whose shares are listed and traded on a national or regional securities exchange by Franchise or any Franchise Owner.
This non-compete clause prevents former Fitstop franchisees from leveraging their knowledge and experience gained during their franchise term to directly compete with Fitstop. The 25-mile radius is designed to protect Fitstop's market share and brand reputation within areas where it has existing or planned locations. The clause regarding publicly traded companies protects franchisees' ability to invest in the stock market without violating the agreement.
Fitstop also retains the right to reduce the scope of this covenant at its discretion, providing flexibility to adjust the restrictions based on specific circumstances. This modification would be effective immediately upon written notice to the franchisee. Franchisees are also prohibited from diverting or attempting to divert any member or potential member of the Fitstop franchise to any competitor, or performing any act injurious to the goodwill associated with Fitstop, the System, Proprietary Marks and/or the Franchise System generally.
It is important for prospective franchisees to understand the implications of this non-compete agreement. They should consider the geographic limitations and how they might affect their future business opportunities after leaving the Fitstop system. Franchisees should seek legal counsel to fully understand the terms and conditions of the non-compete agreement and its potential impact on their future business endeavors.