If a Fitstop franchisee defaults on a loan, is Fitstop liable?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
- 15.16 Involuntary transfers of this Agreement or the assets of the Franchise, such as by legal process, are not permitted, are not binding on us, and are grounds for the termination of this Agreement.
Your use of this Agreement as security for a loan or other similar encumbrance is prohibited, unless we specifically consent to any such action in writing prior to the proposed transaction. You shall not purport to grant a sub-franchise under this Agreement nor seek to franchise, license, or permit others to use this Franchise or any of the rights, assets, or property derived by or licensed to you under this Agreement.
- 17.2 You agree to be solely responsible for the services and results of services performed at locations where services are performed by you and to hold harmless and indemnify us, including our officers, directors, trustees, shareholders, heirs, executors, administrators, attorneys, successors, assigns, principals, agents, servants, employees, consultants, representatives, parents, owners, brokers, affiliates, subsidiaries, and related entities ("Franchisor Parties"), from any and all claims arising from actions by you, the members you are servicing, or your employees, agents, or representatives including, but not limited to, claims of employment or joint employment.
Source: Item 10 — FINANCING (FDD page 24)
What This Means (2024 FDD)
Based on the 2024 Fitstop Franchise Disclosure Document, the document does not explicitly state whether Fitstop would be liable if a franchisee defaults on a loan. However, the FDD does state that franchisees are prohibited from using the Franchise Agreement as security for a loan without Fitstop's written consent.
Item 17.2 states that the franchisee agrees to be solely responsible for the services and the results of services performed at their location. The franchisee also agrees to indemnify Fitstop from any and all claims arising from actions by the franchisee, the members they are servicing, or their employees, agents, or representatives, including claims of employment or joint employment. This suggests that Fitstop aims to limit its liability related to the franchisee's business operations.
To fully understand Fitstop's position on liability related to franchisee loan defaults, a prospective franchisee should seek clarification from Fitstop regarding their policies and any potential scenarios where Fitstop might assume liability. It would also be prudent to consult with a legal professional to review the Franchise Agreement and understand the full scope of liability and financial obligations.