What is the dependency between signing the Development Agreement and the initial Franchise Agreement for Fly Fitness?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
evelop as set forth on the Mandatory Development Schedule.
- The Development Fee is fully earned at the time this Multi-Unit Development Agreement is signed and is not refundable under any circumstances. Developer shall pay the full amount of the Development Fee to Franchisor upon Developer's execution of this Agreement.
- 4.2 Application of Development Fee. Contemporaneous with the execution of this Agreement, Developer shall execute the initial Franchise Agreement for the first Franchised Business to be established pursuant to the Mandatory Development Schedule. Developer shall receive the applicable credit from the Development Fee, which shall be applied to the Initial Franchise Fee due under the initial Franchise Agreement. Provided that Developer is in compliance with the Mandatory Development Schedule and is not otherwise in breach of this Agreement, upon the execution each of additional Franchise Agreement for a Franchised Business to be developed hereunder, Developer shall receive the applicable credit from the Development Fee, which shall be applied to the Initial Franchise Fee payable pursuant to each such additional Franchise Agreement. Upon Franchisor's approval, Developer may enter into the initial Franchise Agreement or any subsequent Franchise Agreement as required under this Agreement using a newly formed entity, such as a limited liability company, corporation or partnership, for the sole purpose of entering into a Franchise Agreement and operating the Franchised Business pursuant thereto, provided that Developer shall also personally sign such Franchise Agreement as a principal.
5. EXERCISE OF DEVELOPMENT RIGHTS.
5.1 Valid Exercise. Developer shall exercise the development rights granted hereunder only by entering into a separate Franchise Agreement with Franchisor for each Franchised Business for which a development right is granted. Developer shall execute and deliver to Franchisor, concurrently with the execution and delivery of this Agreement, Franchisor's current form of Franchise Agreement for the first Franchised Business to be established by Developer pursuant to the Mandatory Development Schedule.
Source: Item 23 — RECEIPT (FDD pages 45–182)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, signing the Development Agreement and the initial Franchise Agreement are linked. Specifically, the developer must execute the initial Franchise Agreement for their first Fly Fitness location when they sign the Multi-Unit Development Agreement. This initial Franchise Agreement allows the developer to begin establishing their first franchised business under the development schedule.
Fly Fitness requires that the developer enter into a separate Franchise Agreement for each franchised business they plan to open. When the developer signs the Development Agreement, they must also sign the Franchise Agreement for their first location. For each subsequent location, the developer must sign an additional Franchise Agreement when they execute a lease for that location, provided they meet all other conditions. The Franchise Agreement presented for these subsequent locations will be the then-current version, which may differ from the initial agreement.
This concurrent execution ensures Fly Fitness that the developer is committed to opening at least one location immediately. It also allows Fly Fitness to collect the initial franchise fee for that first location, offset by any applicable credit from the Development Fee. The developer waives any obligation for Fly Fitness to provide additional training beyond the initial training received with the first Franchise Agreement, acknowledging that this initial training is sufficient for operating all subsequent locations.