During the term of the Fitstop agreement, can a franchisee acquire a financial interest in a business similar to the franchise without prior written consent?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.3.3 Without our prior written consent, you shall not, directly or indirectly, engage in, acquire any financial or beneficial interest (including interests in corporations, partnerships, trusts, unincorporated associations, or joint ventures) in, or become a landlord for any business, which is similar to the Franchised Business, from a physical location within 25 miles of (a) the Premises, (b) the perimeter of the Designated Territory, or (c) the location of any other System Business that is open or under development as of the date this Agreement is terminated or expires, except that the Parties agree and acknowledge that this covenant shall not be applicable to ownership of less than 2% of the shares of a company whose shares are listed and traded on a national or regional securities exchange by Franchise or any Franchise Owner;
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, franchisees are restricted from acquiring financial interests in similar businesses without prior written consent. Specifically, a Fitstop franchisee cannot directly or indirectly engage in, acquire any financial or beneficial interest in, or become a landlord for any business similar to the franchised business without Fitstop's permission. This includes interests in corporations, partnerships, trusts, unincorporated associations, or joint ventures.
This restriction applies to businesses operating from a physical location within 25 miles of the franchisee's Fitstop location, the perimeter of their designated territory, or the location of any other Fitstop business that is open or under development. However, there is an exception: franchisees can own less than 2% of the shares of a company whose shares are listed and traded on a national or regional securities exchange without needing prior written consent from Fitstop.
This clause is designed to prevent franchisees from investing in or operating competing businesses that could draw customers away from their Fitstop franchise or otherwise harm the Fitstop system. The 25-mile radius restriction and the exclusion for minor investments in publicly traded companies are intended to balance Fitstop's need to protect its business interests with the franchisee's ability to make independent investment decisions. Franchisees should be aware of these restrictions and seek written consent from Fitstop before making any investments that could be considered a conflict of interest.