Under what terms does Fitstop have the right to acquire a Fitstop franchisee's business?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
| 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. |
|---|---|---|
| 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 y |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 42–47)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, Fitstop has the right to acquire a franchisee's business under certain conditions. Specifically, Fitstop has the right of first refusal, meaning they can acquire the business under the same terms that a franchisee is offering to a third party.
This means that if a Fitstop franchisee decides to sell their business, they must first notify Fitstop of their intent and the terms of the offer from the third party. Fitstop then has the option to purchase the franchise business on those exact same terms. This right is detailed in Sections 13.2 and 15.3 of the Franchise Agreement.
This clause is a standard practice in franchising, allowing Fitstop to maintain control over its brand and ensure that any new owners meet their standards. For a prospective franchisee, this means they may have a more limited pool of potential buyers if they decide to sell, as any sale is contingent on Fitstop's decision to not exercise its right of first refusal. It is important for franchisees to understand this condition, as it can impact their exit strategy and the potential value of their business when selling.