After the Fitstop agreement terminates, does the Fitstop non-compete agreement restrict the franchisee from becoming a landlord for a business similar to the Franchised Business?

According to Fitstop's 2024 Franchise Disclosure Document, after the franchise agreement terminates, a franchisee is restricted from becoming a landlord for a business similar to the Fitstop franchised business. Specifically, the franchisee cannot, without Fitstop's prior written consent, directly or indirectly engage in, acquire any financial or beneficial interest in, or become a landlord for any business similar to the Franchised Business.

This restriction applies 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 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 is designed to protect Fitstop's market and prevent former franchisees from directly benefiting from their knowledge of the Fitstop system in close proximity to existing Fitstop locations. The 25-mile radius is a key factor for prospective franchisees to consider, as it could limit their future business opportunities in the fitness industry within that zone. The exception for minor stock ownership in publicly traded companies provides a limited avenue for investment without violating the agreement.