What covenants must a Fly Fitness franchisee comply with upon termination of the franchise agreement, as outlined in Article 19?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
In consideration for such specialized training, trade secrets, Confidential Information and rights, Franchisee, and Principal(s) covenant that, except as otherwise approved in writing by Franchisor:
19.5.1 During the term of this Agreement, 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; (ii) participate as an owner, partner, director, officer, employee, consultant or agent or serve in any other capacity in any fitness or exercise business similar to the System; or (iii) seek to employ any person who is at that time employed by Franchisor or by any other System franchisee, or otherwise induce such person to leave his or her employment; or (iv) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System or (v) in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Fly Fitness franchisees or Franchisor-affiliated outlets.
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
such person to leave his or her employment or (iv) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System or (v) in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Fly Fitnessfranchisees or Franchisor-affiliated outlets.
- 19.6.
Reasonableness of Restrictions.
Franchisee and Principal(s) acknowledge and agree that the covenants not to compete set forth in this Agreement are fair and reasonable and will not impose any undue hardship on Franchisee or Principal(s) since Franchisee or Principal(s), as the case may be, have other considerable skills, experience and education which afford Franchisee or Principal(s), as the case may be, the opportunity to derive income from other endeavors.
- 19.7.
Reduction of Time or Scope.
If the period of time or the geographic scope specified above, should be adjudged unreasonable in any proceeding, then the period of time will be reduced by such number of months or the geographic scope will be reduced by the elimination of such portion thereof, or both, so that such restrictions may be enforced for such time and scope as are adjudged to be reasonable.
In addition, Franchisor shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in this Article 19 or any portion thereof, without Franchisee's consent, effective immediately upon receipt by Franchisee of written notice thereof, and Franchisee agrees to forthwith comply with any covenant as so modified.
- 19.8.
Injunctive Relief.
Franchisee and Principal(s) acknowledge that a violation of the covenants not to compete contained in this Agreement would result in immediate and irreparable injury to Franchisor for which no adequate remedy at law will be available.
Accordingly, Franchisee and Principal(s) hereby consent to the entry of an injunction prohibiting any conduct by Franchisee or any Principal in violation of the terms of the covenants not to compete set forth 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, Article 19 outlines specific covenants that franchisees and their principals must adhere to both during the franchise term and after its termination or transfer. During the term of the agreement, franchisees and principals are prohibited from diverting business or customers to competitors, participating in similar fitness businesses, seeking to employ the franchisor's or other franchisees' employees, or engaging in any actions that could harm the goodwill associated with the Fly Fitness brand or disrupt the business of the franchisor or other franchisees.
Upon expiration or termination of the agreement, or upon a transfer, these restrictions continue for 24 months. During this period, franchisees and principals are barred from diverting business to competitors, participating in similar fitness businesses within ten miles of the Territory or any Fly Fitness location, or soliciting employees of the franchisor or other franchisees. These covenants aim to protect Fly Fitness's market position, brand reputation, and franchisee network by preventing former franchisees from leveraging their knowledge and resources gained during the franchise term to unfairly compete with the system.
Fly Fitness emphasizes the reasonableness of these restrictions, acknowledging that franchisees and principals possess other skills and experiences that allow them to derive income from other endeavors. The document also includes provisions for reducing the time or scope of these restrictions if they are deemed unreasonable in any legal proceeding, and the franchisor retains the right to modify the scope of any covenant. Furthermore, Fly Fitness asserts that violations of these covenants would cause immediate and irreparable harm to the franchisor, entitling them to injunctive relief to prevent such violations.