After the Fly Fitness agreement expires or terminates, are franchisees allowed to divert business from other franchisees to a competitor?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
- 19.5.2.
Upon the expiration or earlier termination of this Agreement or upon a Transfer and continuing for twenty-four (24) months thereafter, Franchisee and Principal(s) shall not, either directly or indirectly, for themselves or through, on behalf of or in conjunction with any person or entity (i) divert, or attempt to divert, any business or customer of the Franchised Business or of other franchisees in the System to any competitor, by direct or indirect inducement or otherwise; or (ii) participate as an owner, partner, director, officer, employee, consultant or agent or serve in any other capacity in any fitness or exercise business within ten (10) miles of the Territory or any Fly Fitness location; or (iii) seek to employ any person who is at that time employed by Franchisor or by any other System franchisee, or otherwise induce
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, franchisees are restricted from diverting business to competitors even after the franchise agreement expires or terminates. Specifically, for a period of twenty-four (24) months after the agreement's expiration or termination, franchisees and their principals are prohibited from diverting or attempting to divert any business or customers from the franchised business or other franchisees within the Fly Fitness system to any competitor. This restriction applies whether the diversion is through direct or indirect means.
In practical terms, this means that a former Fly Fitness franchisee cannot actively solicit or encourage existing Fly Fitness customers to switch to a competing fitness business for two years following the end of their franchise agreement. This includes actions like directly contacting customers, offering special deals to Fly Fitness members to join a competitor, or any other activity intended to move business away from the Fly Fitness system. The restriction is in place to protect the goodwill and customer base that Fly Fitness has established, and to prevent former franchisees from unfairly leveraging their knowledge of the Fly Fitness system to benefit a competitor.
This type of non-compete clause is common in franchising to protect the brand and the network of franchisees. The duration and geographic scope of these clauses can vary, but the Fly Fitness agreement specifies a 24-month restriction on diverting business. Prospective franchisees should carefully consider this restriction and how it might impact their future business plans if they decide to leave the Fly Fitness system. It is important to note that this clause does not prevent a former franchisee from opening a fitness business, but it does restrict them from actively taking Fly Fitness customers to that new business for a defined period.