What are the consequences of a Fitstop franchisee's breach of the Franchise Agreement, considering the indemnification fee in Item 6 and the franchisee's obligations in Item 9?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
| Indemnification | The costs and expenses we incur in connection with your breach or default under your Franchise Agreement or otherwise in the ownership and operation of your Franchised Business. | As incurred by you. | You are solely responsible and must indemnify and hold us harmless for all loss, damage, claims or demands arising from your Franchise including, but not limited to, any joint employment claims. |
|---|---|---|---|
| Annual Convention | We expect this amount to be around $1,500 to $2,000 per attendee | Paid monthly by you. | You will also be responsible for covering the costs that attendees incur in connection with attending any such event. |
| Fee | |||
| Merchant payment processing costs | Then-current amount charged by our Approved Supplier (if applicable) Currently, these fees are estimated to be between 2% and 4% of Gross Revenue generated by your Franchised Business on an ongoing basis | Payable immediately once collected by the Current Billing/POS Provider | These amounts are payable to our third-party Approved Supplier for such services as of the Issue Date. |
| Interest and/or Late Fees | The lesser of (i) 18% per annum, and (ii) the highest rate permitted for commercial transactions under applicable law | If and as incurred and invoiced | Please note that the maximum interest rate in the State of California amounts to 10% per annum. These amounts may be charged in connection with any fees or amounts that are past due and owing under the Franchise Agreement. |
| Section(s) in Franchise | |
|---|---|
| Obligation | |
| Agreement | |
| Business selection and acquisition | §2 |
| Pre-opening purchases/leases | §9 |
| Business development and other pre-opening | §2 |
| requirements | |
| Initial and ongoing training | § 4 |
| Opening | §§4, 5, 6, 7, 8, 11, 12, 13 |
| Fees | §§4, 13 |
| Compliance with standards and | §§ 6, 9.7, 11, 12 |
| policies/Manual | |
| Trademarks and proprietary information | §§ 2, 3 |
| Restrictions on products/services offered | § 12 |
| Warranty and customer service requirements | §§ 4, 5, 8, 9, 10, 11 |
| Territorial development and sales quotas | §§2, 9 |
| Ongoing product/service purchases | §§ 4, 5, 6, 12 and 13 |
| Maintenance, appearance & remodel | §§9, 11 |
| requirements | |
| Insurance | § 8 |
| Advertising | §§ 6, 7 |
| Indemnification | § 17 |
| Owner's participation/management/staffing | §10 |
| Records/reports | §§ 11 and 13 |
| Inspections/audits | § 13.11 |
| Transfer | § 15 |
| Renewal | § 14 |
17.1 If we institute any action at law or in equity against you to secure or protect our rights under or to enforce the terms of this Agreement, in addition to any judgment entered in our favor, we shall be entitled to recover such reasonable attorneys' fees as may be allowed by the court together with court costs and expenses of litigation.
17.2 You agree to be solely responsible for the services and results of services performed at locations where services are performed by you and to hold harmless and indemnify us, including our officers, directors, trustees, shareholders, heirs, executors, administrators, attorneys, successors, assigns, principals, agents, servants, employees, consultants, representatives, parents, owners, brokers, affiliates, subsidiaries, and related entities ("Franchisor Parties"), from any and all claims arising from actions by you, the members you are servicing, or your employees, agents, or representatives including, but not limited to, claims of employment or joint employment.
©2024 Fitstop USA, Inc. 19.3 Injunctive Relief. You acknowledge and agree that irreparable harm could be caused to us by your violation of certain provisions of this Agreement and, as such, in addition to any other relief available at law or equity, we shall be entitled to obtain in any court of competent jurisdiction, without bond, restraining orders or temporary or permanent injunctions in order to enforce, among other items, the provisions of this Agreement relating to: (i) your unauthorized use of the Proprietary Marks and Confidential Information (including any proprietary software used in connection with the Franchised Business); (ii) the in-term covenant not to compete, as well as any other violations of the restrictive covenants set forth in this Agreement; (iii) your obligation upon termination or expiration of this Agreement; (iv) disputes and controversies based on or arising under the Lanham Act, or otherwise
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- Our right to obtain injunctive relief exists only after proper proofs are made and the appropriate authority has granted such relief.
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, a franchisee's breach of the Franchise Agreement can lead to several consequences, including indemnification responsibilities and potential legal actions. Fitstop outlines various franchisee obligations in Item 9, referencing specific sections within the Franchise Agreement related to business operations, training, fees, compliance, and more. Failure to meet these obligations can trigger the indemnification clause.
Item 6 details that franchisees are responsible for indemnifying Fitstop for costs and expenses incurred due to the franchisee's breach or default under the Franchise Agreement, or in the ownership/operation of the franchised business. This means the franchisee is solely responsible for any losses, damages, claims, or demands arising from their franchise, including but not limited to joint employment claims.
Furthermore, Fitstop can seek legal remedies, including injunctive relief, for violations of certain provisions, such as unauthorized use of proprietary marks or confidential information, breaches of non-compete covenants, or failure to fulfill obligations upon termination or expiration of the agreement. If Fitstop pursues legal action to enforce the agreement, they are entitled to recover reasonable attorneys' fees, court costs, and litigation expenses. The franchisee acknowledges that violating certain provisions could cause irreparable harm to Fitstop, justifying injunctive relief without the need for a bond. However, in New York, Fitstop's right to obtain injunctive relief exists only after proper proofs are made and the appropriate authority has granted such relief.