Does the post-term covenant against competition apply to a Fitstop franchisee if the agreement is assigned or transferred?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
al release of all claims against us and our agents by you (or the transferor, if different) upon the transfer of your (or the transferor's) entire interest in this Agreement, or a material portion thereof;
- 15.8.4 execution by you of a written acknowledgment that your confidentiality and noncompetition covenants, and their application to all covered persons, shall survive any assignment and remain effective as though the assignment had not occurred;
- 15.8.5 the transferee's covenant to us to enforce, and not to waive, the aforesaid covenant not to compete given to them by the transferor;
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to the 2024 Fitstop Franchise Disclosure Document, the post-term covenant against competition applies to a Fitstop franchisee if the agreement is assigned or transferred. Specifically, the agreement states that the non-compete obligations begin upon the expiration, termination, assignment, or transfer of the agreement, regardless of the cause.
This means that if a Fitstop franchisee sells or transfers their franchise to another party, the original franchisee is still bound by the non-compete agreement for two years following the transfer. This prevents the former franchisee from immediately opening a competing business or working for a competitor in the same area, which could undermine the value of the franchise that was sold.
Furthermore, the FDD states that the franchisee must execute a written acknowledgment that their confidentiality and noncompetition covenants, and their application to all covered persons, will survive any assignment and remain effective as though the assignment had not occurred. The transferee must also covenant to Fitstop to enforce, and not to waive, the non-compete agreement given to them by the transferor. This ensures that Fitstop can legally enforce the non-compete agreement against the original franchisee even after the transfer.