Does Fitstop have the option to assume the lease for the Approved Premises of a franchisee upon termination or nonrenewal?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
| h. "Cause" defined—non-curable defaults | Section 16.1 | Non-curable defaults include being convicted of, pleading guilty or no contest to, or receiving deferred adjudication for a felony, crime of moral turpitude, or certain other crimes; attempts to hack or crack our computer software; disclosure of confidential information; abandonment; unauthorized transfer; material misrepresentations when you purchase the franchise; repeated failure to comply with Franchise Agreement or Manual requirements, even if corrected; or if you are declared insolvent or bankrupt. |
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| i. Franchisee's obligations on termination/nonrenewal | Section 16 | You must: (i) immediately cease use of all our Proprietary Marks, Confidential Information, trade secrets, and all aspects of the Franchise System; (ii) immediately return to us all advertising materials, products, or writing that contain, bear or otherwise use and of the Marks and IP, as well as all materials containing Confidential Information; (iii) pay all outstanding amounts due and owing to us under the Franchise Agreement; (iv) assign all telephone numbers and domain names associated with the Franchised Business to us (at our option) or otherwise cancel any registration for the same; (v) afford us (directly or via an operating affiliate) the right to (a) assume the lease for your Approved Premises, and/or (b) acquire all other operating assets associated with the Franchised Business at net depreciated book value, as detailed more fully in your Franchise Agreement; and (vi) comply with all confidentiality, non-disclosure and other post-term restrictive covenants detailed more fully below in this Item 17 Chart. |
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, upon termination or nonrenewal of the franchise agreement, Fitstop has the option to assume the lease for the franchisee's approved premises. Specifically, the franchisee must afford Fitstop the right to assume the lease for the approved premises. This is in addition to other obligations the franchisee has upon termination or nonrenewal.
This provision is significant for prospective Fitstop franchisees as it means that upon termination or nonrenewal, Fitstop has the right to take over the physical location of the business. This could impact the franchisee's ability to operate a similar business in the same location after the franchise agreement ends. It also means that Fitstop could potentially continue operating a Fitstop location at that site with a new franchisee or under corporate management.
In addition to Fitstop's right to assume the lease, the franchisee is also obligated to assign all telephone numbers and domain names associated with the franchised business to Fitstop (at Fitstop's option) or otherwise cancel any registration for the same. The franchisee must also return all advertising materials, products, or writing that contain, bear or otherwise use any of the Marks and IP, as well as all materials containing Confidential Information. These combined obligations ensure a clean break and allow Fitstop to maintain control over its brand and operations after a franchise agreement ends.