Does the Fitstop post-term covenant against competition include becoming a landlord for a business similar to the Franchised Business?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.3.3 Without our prior written consent, you shall not, directly or indirectly, engage in, acquire any financial or beneficial interest (including interests in corporations, partnerships, trusts, unincorporated associations, or joint ventures) in, or become a landlord for any business, which is similar to the Franchised Business, from a physical location within 25 miles of (a) the Premises, (b) the perimeter of the Designated Territory, or (c) the location of any other System Business that is open or under development as of the date this Agreement is terminated or expires, except that the Parties agree and acknowledge that this covenant shall not be applicable to ownership of less than 2% of the shares of a company whose shares are listed and traded on a national or regional securities exchange by Franchise or any Franchise Owner;
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, the post-term covenant against competition does address becoming a landlord for a similar business. Specifically, without Fitstop's prior written consent, a franchisee cannot directly or indirectly engage in, acquire any financial or beneficial interest in, or become a landlord for any business similar to the Franchised Business.
This restriction applies to physical locations within 25 miles of (a) the Premises, (b) the perimeter of the Designated Territory, or (c) the location of any other System Business that is open or under development as of the date the Franchise Agreement is terminated or expires. However, there is an exception: this covenant does not apply to ownership of less than 2% of the shares of a company whose shares are listed and traded on a national or regional securities exchange.
This clause is designed to prevent former Fitstop franchisees from supporting competing businesses in close proximity to existing Fitstop locations, thereby protecting Fitstop's market share and brand integrity. Prospective franchisees should carefully consider the implications of this restriction, especially if they have real estate holdings or investment interests in businesses that could be considered similar to a Fitstop franchise within the specified radius.