What is the 'Designated Territory' referring to in the Fitstop Franchise Disclosure Document?

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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.

Once we agree upon and you secure your Premises, we will designate the same and, if applicable, any adjustment to the Designated Territory, in an amendment to the Franchise Agreement that you will be required to execute at or around the time you execute a lease for said Premises. You may not relocate the Premises of your Franchised Business without our written consent, which we will not unreasonably withhold provided: (i) the new location is located within your Designated Territory and meets our thencurrent criteria for a System-associated Premises; and (ii) you pay our then-current relocation fee (if any). When considering a request for relocation, we may take into account the desirability of the proposed new location, its distance from other and future-planned franchised locations, the traffic patterns, security, cost, and the demographics of the area, proximity of competition, parking, as well as any other related factors we deem appropriate. These are the same kinds of factors we consider when evaluating your initial Premises.

Rights Within and Outside Designated Territory

There are no territorial restrictions from accepting and providing the Approved Services to customers/patrons that reside/work or are otherwise based outside of your Designated Territory, provided you only perform such Approved Services to the customer base from the Premises of your Franchised Business. Other System Businesses and franchisees will have these same rights. You will not be required to pay us any additional consideration for accepting clientele from those that reside outside of your Designated Territory, provided all Approved Services and revenue is generated at and from the approved Premises.

You may not use alternative channels of distribution, such as the internet, catalog sales, telemarketing or other direct marketing, to make any sales outside of your Designated Territory (including the sale of any Approved Products). You are also prohibited from actively soliciting customers outside of your Designated Territory without our prior written consent. We are not required to pay you any compensation for soliciting or accepting orders inside your Designated Territory. Your Franchise Agreement does not provide you with any right of first refusal, option or any other rights to acquire additional franchises.

Reserved Rights

We reserve all rights not expressly granted to you. These include the right to: (i) establish and operate, and license any third party the right to establish and operate, other Franchised Businesses using the Marks and System at any location outside of your Designated Territory; (ii) market, offer and sell products and services that are similar to the Approved Products and Approved Services offered by the Franchised Business under a different trademark or trademarks at any location, within or outside the Designated Territory; (iii) use the Marks and System, other such marks we designate, to distribute our Approved Products and/or Approved Services (including private label products that we may develop in the future) in any alternative or dissimilar channels of distribution, within or outside the Designated Territory (including by electronic means, such as the internet and by websites we establish, direct mail, wholesale stores, etc.); (iv) engage in any transaction, including to purchase or be purchased by, to merge or combine with, to convert to the System or be converted into a new system with any business, including such businesses operated by competitors or otherwise operated independently or as part of, or in association with, any other system or chain, whether franchised or corporately owned and whether located inside or outside of the Designated Territory, provided that in such situations the newly acquired businesses may not operate under the Proprietary Marks in the Designated Territory; and (v) use the Proprietary Marks and System, and license others to use the Proprietary Marks and System, to engage in any other activities not expressly prohibited in your Franchise Agreement.

We also reserve the right to open and operate and/or license others the right to operate a System Business under the Proprietary Marks from a captive venue or other non-traditional location, including by way of example, academic institutions, military bases, "big box" gyms, hotels and/or airports (each, a "Non-Traditional Venue").

Your Franchise Agreement does not grant you any right to (a) engage in any of the activities outlined in the preceding paragraph, or (b) share in any of the proceeds received by us, our affiliates or any third party from these activities, unless we otherwise agree in writing. We have no obligation to provide you with any compensation for soliciting or accepting orders inside your territory.

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.

Source: Item 12 — TERRITORY (FDD pages 35–37)