After a Fitstop franchisee notifies Fitstop of their plan to transfer their business, what will Fitstop do?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
| m. Conditions for franchisor approval of transfer | Section 15.11 | Conditions include: you must be in full compliance with your Franchise Agreement; you must pay us all amounts due; transferee and its managers must satisfactorily complete our training program; transferee executes our thencurrent form of Franchise Agreement; you or transferee must pay transfer fee; we must approve written agreements regarding transfer; you must supply us with any additional information we reasonably require regarding the transfer; you must 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/or our franchisees; and you must sign a general release and other documents we require. Please also see post-term covenants described below in this Item 17 Chart. |
|---|---|---|
| n Franchisor's might of first referri | Section 15.2 | We have a right to acquire your business and so the |
| n. Franchisor's right of first refusal to acquire franchisee's business | Section 13.2 | We have a right to acquire your business under the same terms you are offering to a third party. |
| o. Franchisor's option to purchase franchisee's business | Section 15.3 | You must notify us if you plan to transfer your business to a third party. After you notify us, we will notify you whether we will purchase your business under the same terms you are offering to a third party. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 42–47)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, if a franchisee plans to transfer their business to a third party, they must notify Fitstop. After Fitstop receives this notification, Fitstop will then notify the franchisee whether it will purchase the business under the same terms offered to the third party. This is referred to as Fitstop's option to purchase the franchisee's business.
This clause gives Fitstop the right of first refusal. It means that before a franchisee can sell their Fitstop business to someone else, Fitstop gets the first chance to buy it themselves, matching the terms of the offer from the outside buyer. This is a fairly common practice in franchising, allowing the franchisor to maintain control over who joins their system and to ensure a smooth transition if a franchisee exits.
For a prospective Fitstop franchisee, this means they may not have complete freedom to sell their business to whomever they choose. If Fitstop exercises its option, the franchisee would be obligated to sell to Fitstop instead of their preferred buyer. It is important to understand the implications of this clause before investing in a Fitstop franchise, as it could affect the franchisee's exit strategy and potential return on investment.