What is the effect of Fitstop not exercising its Right of First Refusal on the transfer process?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
15.5 If there are any material changes in the terms and conditions of the proposed transfer after we notify you of our election not to exercise our Right of First Refusal, or after the expiration of the time period within which we can elect to exercise our right, you shall notify us of the changes in writing and we shall then have an additional 10 calendar days within which to elect to exercise our Right of First Refusal.
15.6 If the proposed transfer is not completed for any reason within 90 calendar days after we elect not to exercise or assign our Right of First Refusal, or after the expiration of the time allowed for such election, a new Right of First Refusal commences as to the concerned transaction and any subsequent proposed sales or transfers by you.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, if Fitstop chooses not to exercise its Right of First Refusal (ROFR) during a proposed transfer, the franchisee is then free to proceed with the transfer to their intended transferee. However, if the transfer is not completed within 90 calendar days after Fitstop declines to exercise its ROFR, or after the period for them to elect to exercise the right expires, a new Right of First Refusal is triggered for any subsequent proposed sales or transfers. This means the franchisee would have to go through the notification and ROFR process again with Fitstop.
If there are any material changes to the terms of the proposed transfer after Fitstop has initially waived its ROFR, the franchisee must notify Fitstop in writing. Fitstop then has an additional 10 calendar days to decide whether to exercise its Right of First Refusal based on the revised terms. This protects Fitstop from having a transfer occur under substantially different conditions than what they initially evaluated.
Overall, Fitstop's decision not to exercise its ROFR allows the transfer to proceed under the agreed-upon terms, but it's time-sensitive. Franchisees must complete the transfer within 90 days, and any significant changes to the transfer agreement will give Fitstop another opportunity to intervene. This process is fairly standard in franchising, as it allows the franchisor to maintain control over who enters the system while also allowing franchisees a reasonable exit strategy.