Can Fly Fitness assign the Franchise Agreement without the franchisee's permission?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
16.1. Transfers by Franchisor.
- 16.1.1.
Franchisor shall have the right to assign this Agreement, and all of Franchisor's rights and privileges hereunder, to any person, firm, corporation, or other entity, without Franchisee's permission or prior knowledge, provided that, with respect to any assignment resulting in the subsequent performance by the assignee of Franchisor's obligations, the assignee shall expressly assume and agree to perform Franchisor's obligations hereunder.
Specifically, and without limitation to the foregoing, Franchisee expressly affirms and agrees that Franchisor may: (i) sell Franchisor's assets and Franchisor's rights to the Marks and the System outright to a third party; (ii) engage in a public or private placement of some or all of Franchisor's securities; (iii) merge, acquire other corporations, or be acquired by another corporation, including competitors; (iv) undertake a refinancing, recapitalization, leveraged buy-out or other economic or financial restructuring; and (v) with regard to any or all of the above sales, assignments and dispositions, Franchisee expressly and specifically waives any claims, demands or damages arising from or relating to the loss of association with or identification of Franchisor.
Nothing contained in this Agreement shall require Franchisor to remain in the business franchised herein or to offer the same products and services, whether or not bearing the Marks, in the event that Franchisor exercises its prerogative hereunder to assign Franchisor's rights in this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, Fly Fitness has the right to assign the Franchise Agreement to another entity without the franchisee's permission or prior knowledge. However, if the assignment results in the assignee performing Fly Fitness's obligations, the assignee must expressly assume and agree to perform those obligations. Fly Fitness can sell its assets and rights to the Marks and the System, engage in security placements, merge with or acquire other corporations, or undergo financial restructuring. The franchisee waives any claims related to loss of association with Fly Fitness due to these actions. Fly Fitness is not obligated to remain in the franchised business or offer the same products and services if it assigns its rights.
This means that a prospective Fly Fitness franchisee should be aware that the company could be sold or merged, potentially changing the management and support systems. While the new entity would need to uphold the existing franchise agreement, the franchisee's relationship with the brand could fundamentally change. This is a fairly standard clause in franchise agreements, as it allows the franchisor flexibility in business operations and potential exit strategies.
It is important for a potential Fly Fitness franchisee to consider the implications of this clause. While Fly Fitness is ensuring that the assignee will perform the obligations under the agreement, the franchisee should consider what recourse they may have if the new entity does not operate the franchise system in a way that is beneficial to the franchisees. It would be prudent to seek legal counsel to fully understand the protections and limitations within the franchise agreement regarding such assignments.