After a transfer of a Fitstop franchise, can the original franchisee be released from their obligations?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
You and each transferor shall continue to remain personally liable for all affirmative obligations, covenants, and agreements contained herein for the full term of this Franchise or for such shorter period as we may, in our sole discretion, determine.
Upon each assignment or other transfer of this Franchise to any person or persons under the terms and conditions of this Section, the prevailing fees (i.e., Royalty Fee, Marketing Fee, Technology Fee, Annual Convention Fee, etc. ) owing to us after the date of such assignment or transfer shall be automatically adjusted to the then prevailing percentage required for new franchises issued by us at the time of such assignment or transfer.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, franchisees and transferors remain personally liable for all obligations, covenants, and agreements within the Franchise Agreement for the full term, unless Fitstop, in its sole discretion, determines a shorter period.
Specifically, even after an assignment or transfer of the Fitstop franchise, the prevailing fees (Royalty Fee, Marketing Fee, Technology Fee, Annual Convention Fee, etc.) will be automatically adjusted to the percentage required for new franchises at the time of the transfer. This adjustment of fees does not release the original franchisee from their existing liabilities unless Fitstop agrees to a shorter period.
In practical terms, this means that if you transfer your Fitstop franchise, you could still be held responsible for the new franchisee's performance of the agreement, unless Fitstop explicitly releases you from this obligation. This is a significant consideration for any franchisee planning to sell or transfer their business, as it highlights the importance of ensuring the transferee is capable and committed to fulfilling the franchise obligations. Franchisees should seek legal counsel to fully understand the implications of this clause and to negotiate the possibility of a release from liability as part of the transfer agreement.