What are the restrictions on the Fitstop franchisee's ability to operate a competing business, considering the designated territory (Item 12) and the franchisee's obligations in Item 9?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
Subject to our reserved rights set forth more fully below in this Item, we will not open or operate, or license any third party a license to own or operate, a System Business that operates under the Proprietary Marks from a premises that is physically located within your Designated Territory. You will be afforded this territorial right until such time that the Franchise Agreement governing the Designated Territory at issue expires or is terminated.
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.
You may accept business and inquiries from prospective and existing members and customers (each, a "Member") via your Franchised Business, provided you: (i) only provide the Approved Services and Approved Products at and from the Premises, unless we agree otherwise in a separately-signed agreement; and (ii) do not market the Franchised Business or otherwise solicit any potential customers or members outside of your Designated Territory.
You may not use alternative channels of distribution, such as the internet, catalog sales, telemarketing or other direct marketing, to make any sales outside of your Designated Territory (including the sale of any Approved Products). You are also prohibited from actively soliciting customers outside of your Designated Territory without our prior written consent.
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, franchisees face specific restrictions regarding their ability to operate a competing business, particularly concerning their designated territory. Fitstop grants franchisees a designated territory, and will not open or operate, or license any third party to open or operate, another Fitstop System Business under the Proprietary Marks from a physical location within the Designated Territory. This territorial right lasts as long as the Franchise Agreement is active.
However, Fitstop retains several rights that could impact a franchisee's business. Fitstop reserves the right to market and sell similar products and services under different trademarks, even within the franchisee's designated territory. They can also distribute approved products and services through alternative channels, such as the internet or direct mail, both inside and outside the designated territory. Additionally, Fitstop can engage in transactions with other businesses, including competitors, as long as the acquired businesses do not operate under Fitstop's Proprietary Marks within the franchisee's designated territory.
The franchisee is restricted from actively soliciting customers outside their designated territory without prior written consent from Fitstop. While franchisees can accept business from customers residing outside their territory, they must provide all approved services and generate all revenue from their approved premises. The franchisee cannot use alternative channels of distribution, like the internet, to make sales outside of their designated territory. These restrictions are in place to protect the integrity of the Fitstop brand and to ensure fair competition among franchisees, while also allowing Fitstop to explore other market opportunities.