Does Fitstop guarantee a franchisee's obligations to third parties?

According to Fitstop's 2024 Franchise Disclosure Document, Fitstop does not guarantee a franchisee's obligations to third parties. However, in the event of a franchise transfer to a corporation wholly-owned by the franchisee, the transferring owner must agree to remain personally responsible for the performance of the terms and conditions of the Franchise Agreement. The absence of any additional written agreements or guarantees concerning the transfer will not affect the continuing liability of the transferring owner. Fitstop may impose similar requirements on any proposed transfer of this Franchise to a trust.

This means that if a franchisee transfers their Fitstop franchise to a corporation they own, they still remain personally liable to Fitstop for the franchise's performance. This is a fairly common practice in franchising, as franchisors want to ensure that the original franchisee remains committed to the business even after transferring ownership to a corporate entity. This protects Fitstop by ensuring the original franchisee remains accountable for upholding the franchise agreement, even after the transfer.

For a prospective Fitstop franchisee, this implies that they cannot fully escape their obligations under the Franchise Agreement by transferring the franchise to a corporation or trust without remaining personally liable. They should carefully consider this personal liability before deciding to transfer the franchise. It is important to note that this clause only addresses the franchisee's obligations to Fitstop, not to other third parties. The franchisee is still responsible for their obligations to other third parties.