Does Fitstop have reserved rights that affect the exclusivity of the Designated Territory?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
We reserve all rights not expressly granted to you. These include the right to: (i) establish and operate, and license any third party the right to establish and operate, other Franchised Businesses using the Marks and System at any location outside of your Designated Territory; (ii) market, offer and sell products and services that are similar to the Approved Products and Approved Services offered by the Franchised Business under a different trademark or trademarks at any location, within or outside the Designated Territory; (iii) use the Marks and System, other such marks we designate, to distribute our Approved Products and/or Approved Services (including private label products that we may develop in the future) in any alternative or dissimilar channels of distribution, within or outside the Designated Territory (including by electronic means, such as the internet and by websites we establish, direct mail, wholesale stores, etc.); (iv) engage in any transaction, including to purchase or be purchased by, to merge or combine with, to convert to the System or be converted into a new system with any business, including such businesses operated by competitors or otherwise operated independently or as part of, or in association with, any other system or chain, whether franchised or corporately owned and whether located inside or outside of the Designated Territory, provided that in such situations the newly acquired businesses may not operate under the Proprietary Marks in the Designated Territory; and (v) use the Proprietary Marks and System, and license others to use the Proprietary Marks and System, to engage in any other activities not expressly prohibited in your Franchise Agreement.
We also reserve the right to open and operate and/or license others the right to operate a System Business under the Proprietary Marks from a captive venue or other non-traditional location, including by way of example, academic institutions, military bases, "big box" gyms, hotels and/or airports (each, a "Non-Traditional Venue").
Your Franchise Agreement does not grant you any right to (a) engage in any of the activities outlined in the preceding paragraph, or (b) share in any of the proceeds received by us, our affiliates or any third party from these activities, unless we otherwise agree in writing. We have no obligation to provide you with any compensation for soliciting or accepting orders inside your territory.
Given we reserve the right to locate System Businesses within Non-Traditional Venues located with your Designated Territory, please note that we must disclose the following statement: Your territory is not exclusive. You may face competition from company-owned or other System franchisees.
Source: Item 12 — TERRITORY (FDD pages 35–37)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, Fitstop retains several rights that impact the exclusivity of a franchisee's designated territory. Fitstop reserves the right to establish and operate, or license others to operate, Fitstop businesses outside the franchisee's Designated Territory. They can also market and sell similar products and services under different trademarks within or outside the Designated Territory. Additionally, Fitstop can use its trademarks and system to distribute approved products and services through various channels, including the internet and wholesale, within or outside the Designated Territory.
Fitstop also reserves the right to engage in transactions with other businesses, including competitors, without granting the franchisee any rights to those acquired businesses operating under Fitstop's trademarks within the franchisee's Designated Territory. Furthermore, Fitstop can operate or license others to operate a Fitstop business under its trademarks from non-traditional locations such as academic institutions, military bases, big box gyms, hotels, and airports, even within a franchisee's territory. The Franchise Agreement does not grant the franchisee any rights to participate in these activities or share in any proceeds derived from them.
Because Fitstop reserves the right to locate System Businesses within Non-Traditional Venues located with your Designated Territory, the FDD states that the territory is not exclusive and franchisees may face competition from company-owned or other System franchisees. These reserved rights mean that while Fitstop grants a Designated Territory, the franchisee's rights are limited, and Fitstop retains significant control over its brand's distribution and expansion, potentially leading to competition within the franchisee's area.
These reservations are typical in many franchise systems, as they allow the franchisor to explore alternative distribution channels and partnerships. However, prospective Fitstop franchisees should carefully consider how these reserved rights might affect their business and profitability within their Designated Territory. It is important to understand the potential for competition from both traditional and non-traditional Fitstop locations and to assess the impact of Fitstop's ability to market similar products under different trademarks.