In a Fitstop franchise transfer, what acknowledgement regarding confidentiality and noncompetition covenants must be executed?

According to Fitstop's 2024 Franchise Disclosure Document, a transferring franchisee must execute a written acknowledgement regarding confidentiality and noncompetition covenants. Specifically, the franchisee must acknowledge that these covenants, along with their application to all covered persons, will survive the assignment and remain effective as if the assignment had not occurred.

This requirement ensures that even after a Fitstop franchise is transferred to a new owner, the original franchisee remains bound by the confidentiality and noncompetition agreements. This protects Fitstop's proprietary information and market position by preventing the former franchisee from using confidential information gained during their tenure to compete against the new franchisee or the Fitstop system.

In addition to the transferring franchisee's acknowledgement, the new transferee must also covenant with Fitstop to enforce, and not waive, the non-compete agreement that was given to them by the transferor. This dual requirement places the onus on both parties to uphold the confidentiality and non-competition agreements, safeguarding Fitstop's interests during and after the transfer process. This is a fairly standard practice in franchising to protect the brand and system standards.

Prospective Fitstop franchisees should understand that these covenants are taken seriously and are designed to protect the franchisor's interests. They should carefully review the terms of the confidentiality and noncompetition agreements before signing the Franchise Agreement and be aware of their ongoing obligations even after a potential transfer.