What happens to the Royalty Fee for a Fitstop franchise after a transfer?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
Upon each assignment or other transfer of this Franchise to any person or persons under the terms and conditions of this Section, the prevailing fees (i.e., Royalty Fee, Marketing Fee, Technology Fee, Annual Convention Fee, etc. ) owing to us after the date of such assignment or transfer shall be automatically adjusted to the then prevailing percentage required for new franchises issued by us at the time of such assignment or transfer.
15.19 Upon sale, assignment, termination, expiration, or transfer of this Agreement, you shall deliver to us all property belonging to us and/or relating to our business.
15.20 If you purport to transfer this Agreement or ownership in Franchise, in whole or in part, or any of your rights hereunder, or any material portion of any of the real or personal property used by you in connection herewith, without the prior written consent of us, such action shall constitute a material breach of this Agreement and shall be void.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, upon the transfer of a franchise, the royalty fee, along with other fees such as the marketing fee, technology fee, and annual convention fee, will be adjusted to the percentage required for new Fitstop franchises at the time of the transfer. This adjustment occurs automatically after the transfer date.
This means that a new franchisee taking over an existing Fitstop location will not necessarily continue paying the same royalty fee as the previous owner. Instead, their royalty fee will be aligned with the current rate that Fitstop charges new franchisees. This could result in either an increase or a decrease in the royalty fee, depending on how Fitstop's fee structure has changed since the original franchise agreement was established.
For a prospective Fitstop franchisee, this highlights the importance of understanding the current fee structure for new franchises when considering purchasing an existing franchise. It's crucial to factor in the potential change in royalty fees when evaluating the financial viability of the transfer. Additionally, both the transferor and transferee should be aware that the transfer agreement requires the transferee to personally assume full liability for all obligations outlined in the franchise agreement.