What is the purpose of Fitstop's Right of First Refusal regarding franchise transfers?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
irst Refusal, the Parties shall act expeditiously to complete the transfer, provided that the date for the completion of the transfer can be extended at our option for up to an additional 30 calendar days.
- 15.5 If there are any material changes in the terms and conditions of the proposed transfer after we notify you of our election not to exercise our Right of First Refusal, or after the expiration of the time period within which we can elect to exercise our right, you shall notify us of the changes in writing and we shall then have an additional 10 calendar days within which to elect to exercise our Right of First Refusal.
- 15.6 If the proposed transfer is not completed for any reason within 90 calendar days after we elect not to exercise or assign our Right of First Refusal, or after the expiration of the time allowed for such election, a new Right of First Refusal commences as to the concerned transaction and any subsequent proposed sales or transfers by you. You shall provide us with written notice of any proposed transfer and shall comply with the provisions of the Right of First Refusal.
- 15.7 Included with your notice of proposed transfer, unless exempted, shall be your nonrefundable Application Fee of $500 payable to us. The Application Fee will be credited toward the Transfer Fee, as defined above, if the transferee is approved but will otherwise be forfeited to defray our expenses in connection with processing the application. The Application Fee is subject to upward adjustment by any change in the Consumer Price Index specified in this Agreement between its date and the date of the transfer.
- 15.8 Subject to our Right of First Refusal, you may transfer or assign any rights under this Agreement upon our written consent. We may condition transfer on such factors as:
- ©2024 Fitstop US
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, Fitstop maintains a Right of First Refusal, allowing them to step in and purchase a franchise if the franchisee decides to sell. This right enables Fitstop to control who enters the franchise system, ensuring that new franchisees meet their standards for character, business experience, credit rating, and financial strength. By exercising this right, Fitstop can prevent the transfer of a franchise to an undesirable party.
When a franchisee proposes a transfer, they must provide Fitstop with written notice and a nonrefundable application fee of $500. Fitstop then has a period to decide whether to exercise its Right of First Refusal. If Fitstop declines or does not respond within the specified time, the franchisee can proceed with the transfer to their chosen buyer. However, if the terms of the proposed transfer change materially after Fitstop initially declines, the franchisee must notify Fitstop, giving them an additional 10 days to exercise their Right of First Refusal.
If Fitstop chooses to exercise its Right of First Refusal, the transfer must be completed expeditiously, although Fitstop can extend the completion date by up to 30 calendar days. If the transfer is not completed within 90 calendar days after Fitstop declines to exercise its right, a new Right of First Refusal commences for any subsequent proposed sales. This process ensures that Fitstop retains control over franchise ownership and can maintain the quality and consistency of its brand.
Fitstop may also condition a transfer on factors such as the proposed transferee meeting certain character, business experience, credit rating, and financial strength requirements. This ensures that any new franchisee aligns with Fitstop's standards and has the capacity to successfully operate the franchise. The Right of First Refusal, therefore, serves as a mechanism for Fitstop to protect its brand and maintain the integrity of its franchise system.