What is the effect of Fitstop designating a third party to receive the interest being transferred?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
Your interest in this Agreement, including the interest of a partner in a partnership or the stock ownership of a shareholder in a corporation which owns you, is also transferable during your lifetime to a spouse or adult child of the transferor.
However, all such transfers are subject to our conditions and requirements regarding transfers as set forth herein, including, but not limited to, application, approval by us, payment of the application, transfer, and training fees, the transferee's execution of the then-current Franchise Agreement, and to our Right of First Refusal where applicable.
However, if the transfer is to a named beneficiary or to the spouse or an adult child of an individual, transfer fees are not payable.
15.12 Conditions for our approval of transfer include, but are not limited to, the following: (1) you are in full compliance with this Agreement; (2) you pay us all amounts due; (3) transferee and its general managers satisfactorily complete our training program, (4) transferee executes our then-current form of Franchise Agreement; (5) the transfer fee is paid; (6) we approve any written agreements regarding transfer; (7) you supply any additional information we require; (8) you provide, as a personal covenant to the transferee, in addition to your covenants to us, an agreement not to seek to divert business from us and our franchisees; and (9) you sign a general release and other documents we require.
15.13 If we do not approve a potential transferee who proposes to take this Franchise as a beneficiary under your will or by intestate succession, your estate may sell the Franchise to a third party transferee who is acceptable to us, provided that the sale and transfer take place within 180 calendar days after the appointment of the executor, administrator, or other personal representative of you, and subject to the terms of transfer herein, including our first right of refusal, which shall apply.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
Based on the 2024 Fitstop Franchise Disclosure Document, the agreement does not specify any effects of Fitstop designating a third party to receive the interest being transferred. However, the document does state the conditions and requirements for the transfer of a Fitstop franchise.
According to the FDD, the franchisee's interest in the Franchise Agreement is transferable during their lifetime to a spouse or adult child. Additionally, if a court deems a franchisee or a shareholder/partner legally incompetent, the court-appointed guardian may transfer the incompetent person's interest as allowed by law. All such transfers are subject to Fitstop's conditions and requirements, including application, approval, payment of fees, and the transferee's execution of the current Franchise Agreement. However, transfer fees are not payable if the transfer is to a named beneficiary, spouse, or adult child.
Fitstop's conditions for approval include the franchisee's full compliance with the agreement, payment of all due amounts, satisfactory completion of training by the transferee and its general managers, execution of the current Franchise Agreement by the transferee, payment of the transfer fee, approval of written agreements, supply of required information, an agreement from the transferring party not to divert business, and the signing of a general release. If Fitstop does not approve a potential transferee who proposes to take the Franchise as a beneficiary under the franchisee's will or by intestate succession, the estate may sell the Franchise to a third party acceptable to Fitstop within 180 calendar days after the appointment of the executor, administrator, or other personal representative, subject to the terms of transfer and Fitstop's right of first refusal.
Prospective Fitstop franchisees should seek clarification from the franchisor regarding the implications of designating a third party to receive the interest being transferred, as this is not explicitly detailed in the provided FDD excerpts. Understanding the conditions and potential limitations is crucial for making informed decisions about franchise ownership and succession planning.