What are the restrictions on the Fitstop franchisee's ability to sell or transfer the Franchise Agreement, and what are the franchisor's rights in such a transaction?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
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| m. Conditions for franchisor approval of transfer | Section 15.11 | Conditions include: you must be in full compliance with your Franchise Agreement; you must pay us all amounts due; transferee and its managers must satisfactorily complete our training program; transferee executes our thencurrent form of Franchise Agreement; you or transferee must pay transfer fee; we must approve written agreements regarding transfer; you must supply us with any additional information we reasonably require regarding the transfer; you must provide, as a personal covenant to the transferee, in addition to your covenants to us, an agreement not to seek to divert business from us and/or our franchisees; and you must sign a general release and other documents we require. Please also see post-term covenants described below in this Item 17 Chart. |
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| n Franchisor's might of first referri | Section 15.2 | We have a right to acquire your business and so the |
| n. Franchisor's right of first refusal to acquire franchisee's business | Section 13.2 | We have a right to acquire your business under the same terms you are offering to a third party. |
| o. Franchisor's option to purchase franchisee's business | Section 15.3 | You must notify us if you plan to transfer your business to a third party. After you notify us, we will notify you whether we will purchase your business under the same terms you are offering to a third party. |
| p. Death or disability of franchisee | Section 15.12 | Subject to transfer rules; however, an administrative fee, not a transfer fee, is charged if the transfer is to a family member. |
| q. Noncompetition covenants during the term of the franchise | Section 18.2 | You may not have an ownership interest in, financial interest in, or perform services for related businesses anywhere. You also must not divert or attempt to divert any business or customer from us or our franchisees, influence your previous customers or our other franchisees, injure our goodwill, or employ or solicit our employees subject to applicable noncompetition covenants, common law duties of good faith and fair dealing or other applicable business practice laws, and state law. |
| r. Noncompetition covenants after | Section 18.3 | For two years, you must not: divert or attempt to divert any business or customer from us or our franchisees or injure our goodwill; employ or solicit our employees; influence or attempt to influence your previous customers or other franchisees. You must not use the name "Fitstop" |
| the franchise is terminated or expires |
| s. Modification of the agreement | Sections 5.2, 20.4 | No modifications generally except by written agreement, but we may change the Operations Manuals and Franchise System standards at any time. You will be required to implement these changes at your own cost.
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, several conditions and restrictions apply to the transfer of a franchise agreement. Fitstop has a right of first refusal to acquire the franchisee's business under the same terms offered to a third party. If a franchisee plans to transfer their business to a third party, they must notify Fitstop, who will then decide whether to purchase the business themselves under the same terms.
Franchisees must be in full compliance with their Franchise Agreement and pay all amounts due to Fitstop. The proposed transferee and their managers must complete Fitstop's training program satisfactorily and execute the then-current form of the Franchise Agreement. Transfer fees must be paid, and Fitstop must approve all written agreements regarding the transfer. Franchisees must supply any additional information Fitstop reasonably requires. The transferring franchisee must also agree not to divert business from Fitstop or its franchisees and sign a general release and other required documents.
There are some exceptions to these transfer rules. A transfer to a corporation wholly-owned by the existing owner(s) does not require Fitstop's approval or the payment of application or transfer fees, provided the transferring owner(s) remain personally responsible for the agreement's terms. Similarly, if an individual assigns the Franchise to a corporation where they remain the majority stockholder and officer responsible for the franchise's operation, only the Application Fee is charged, not the Transfer Fee, but the transferor must personally guarantee all obligations. Involuntary transfers, such as those by legal process, are not permitted and can lead to termination of the Franchise Agreement.
If an approved transfer is not completed within 180 calendar days, Fitstop has the right to terminate the agreement. Additionally, franchisees are prohibited from using the Franchise Agreement as security for a loan without Fitstop's written consent and cannot grant sub-franchises or license the Franchise to others. Upon the death or incapacity of the franchisee, their estate must comply with the terms of the Franchise Agreement, without exception.