How does the Fitstop designated territory (Item 12) protect the franchisee from competition from other franchisees, and what are the limitations of this protection?

[Item 12: TERRITORY]

ITEM 12: TERRITORY

Designated Territory

As of the Issue Date, we expect and intend to grant you certain territorial rights within a geographical area that will be designated in your Franchise Agreement at the time you execute the same, which we refer to as your "Designated Territory" throughout this Disclosure Document.

Subject to our reserved rights set forth more fully below in this Item, we will not open or operate, or license any third party a license to own or operate, a System Business that operates under the Proprietary Marks from a premises that is physically located within your Designated Territory. You will be afforded this territorial right until such time that the Franchise Agreement governing the Designated Territory at issue expires or is terminated.

As of the Issue Date, we expect that a typical Designated Territory will contain a population of approximately 40,000. We do not, however, have a minimum geographical area that we must afford to a given System franchisee, and we expect that your Designated Territory will vary from the territory granted to other System Business owners due to variance in the population, demographics, corporate/work population and density, proximity of competitors and/or related historical market saturation information. When analyzing and/or determining your Designated Territory on population, we will use publicly-available data and information published as part of the U.S. Census Bureau or comparable source/organization when analyzing the population and other demographics of the area surrounding your Designated Territory.

In certain situations where you have not secured an approved Premises at the time your Franchise Agreement is executed, we may determine to (i) designate a Designated Territory wherein you must locate and secure that Premises, and (ii) adjust the boundaries of the Designated Territory to a comparable geographical region that immediately surrounds the Premises, which we will provide to you in writing as part of our response to our site proposal so you can evaluate before securing the proposed site (if and as we determine appropriate). Otherwise, we may not modify the boundaries of your Designated Territory unless the parties mutually agree to the same in a separate agreement.

Approved Premises and Relocation

You must operate your Franchised Business from an approved Premises that you must secure within the Designated Territory granted to you at the time you execute your Franchise Agreement with us.

Given we reserve the right to locate System Businesses within Non-Traditional Venues located with your Designated Territory, please note that we must disclose the following statement: Your territory is not exclusive. You may face competition from company-owned or other System franchisees.

Additional Disclosures

Your Franchise Agreement does not provide you with any right or option to open and operate any additional Franchised Businesses. As previously discussed, each Franchised Business you are awarded the right to open and operate must be governed by its own specific form of Franchise Agreement unless we agree to add that subsequent franchise to your existing agreement via a form of addendum. We have not established other franchised or company-owned outlets or another distribution channel for offering or selling products/services that are similar to the Approved Products and Approved Services under a different trademark. Neither we nor our affiliates have established, or presently intend to establish, other franchised or company-owned businesses that sell our Approved Products and Approved Services under a different trade name or trademark, but we reserve the right to do so in the future without your consent.