Can Fitstop engage in transactions with other businesses, including competitors, that may impact a Fitstop franchisee's designated territory?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
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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.
Source: Item 12 — TERRITORY (FDD pages 35–37)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, Fitstop retains significant rights that could impact a franchisee's designated territory. Fitstop reserves the right to engage in any transaction with any business, including competitors. This includes purchasing, being purchased by, merging, combining with, converting to the Fitstop system, or being converted into a new system. These transactions can occur with businesses operated independently, as part of another system or chain (franchised or corporately owned), and whether located inside or outside the franchisee's designated territory. However, the acquired businesses may not operate under Fitstop's proprietary marks within the franchisee's designated territory. This means that while Fitstop can merge with a competitor, that competitor cannot operate as a Fitstop within the franchisee's territory.
This reservation of rights has several implications for potential Fitstop franchisees. While franchisees are granted a designated territory, Fitstop maintains considerable flexibility to evolve its business through mergers, acquisitions, or conversions, even with competitors. Although the acquired businesses cannot operate under the Fitstop name in the franchisee's territory, the presence of a competitor that has merged with Fitstop could still indirectly impact the franchisee's business.
Fitstop also reserves the right to establish and operate, or license others to operate, Fitstop businesses in non-traditional venues such as academic institutions, military bases, "big box" gyms, hotels, and airports, even within a franchisee's designated territory. The FDD explicitly states that Fitstop territories are not exclusive, and franchisees may face competition from company-owned or other franchised locations. This lack of exclusivity and the potential for competition from non-traditional venues should be carefully considered by prospective franchisees.
In summary, while Fitstop offers a designated territory, franchisees should be aware that Fitstop retains substantial rights to engage in transactions with other businesses, including competitors, and to operate or license Fitstop businesses in non-traditional venues within that territory. These reserved rights could introduce competition and affect the franchisee's market share, making it crucial for potential franchisees to assess the competitive landscape and market saturation in their area.