What is Fitstop's Right of First Refusal in the context of franchise transfers?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
f 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 USA, Inc. 15.8.1 our satisfaction that the proposed transferee meets (and that transferee's officers or partners, if any, meet) the character, business experience, credit rating, financial strength, and other
standards, criteria, and qualifications then being sought by us from new and other transferee franchisees with due regard to the business potential of the unit; we may withhold consent if we believe in our sole discretion that the number or quality of units to be transferred or the sales price proposed or the terms of payment to you by the prospective transferee are such that successful operation of the Franchise by the transferee might be unreasonably doubtful;
- 15.8.2 full payment of all your outstanding debts;
- 15.8.3 execution of a general release of all claims against us and our agents by you (or the transferor, if different) upon the transfer of your (or the transferor's) entire interest in this Agreement, or a material portion thereof;
- 15.8.4 execution by you of a written acknowledgment that your confidentiality and noncompetition covenants, and their application to all covered persons, shall survive any assignment and remain effective as though the assignment had not occurred;
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 regarding franchise transfers. This means that if a franchisee wants to sell their Fitstop franchise, they must first offer Fitstop the opportunity to purchase the franchise on the same terms as the proposed sale.
Specifically, the franchisee must provide Fitstop with written notice of any proposed transfer. If Fitstop elects to exercise its Right of First Refusal, the parties must act quickly to complete the transfer, although Fitstop can extend the completion date by up to 30 calendar days. If the terms of the proposed transfer change materially after Fitstop declines to exercise its right or after the time period to exercise the right expires, the franchisee must notify Fitstop of the changes, giving Fitstop an additional 10 calendar days to elect to exercise its Right of First Refusal.
If the proposed transfer is not completed within 90 calendar days after Fitstop declines to exercise its right or after the expiration of the election period, a new Right of First Refusal commences for any subsequent proposed sales or transfers. Fitstop may also condition the transfer based on factors such as the proposed transferee's character, business experience, credit rating, and financial strength. The franchisee must also pay a nonrefundable Application Fee of $500, which will be credited toward the Transfer Fee if the transferee is approved. This fee is subject to adjustment based on changes in the Consumer Price Index.
This Right of First Refusal allows Fitstop to maintain control over who becomes a franchisee and ensures that any new franchisee meets their standards. It is a common practice in franchising to protect the brand and maintain consistency across the franchise system. A prospective franchisee should understand these conditions and requirements, including application, approval, payment of fees, and the transferee's execution of the then-current Franchise Agreement.