Is the enforcement of a Fly Fitness developer's post-termination non-competition covenants subject to mediation or arbitration?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
- 10.4 Exceptions.
Notwithstanding the requirements of Sections 10.2 or 10.3, the following claims shall not be subject to mediation or arbitration:
10.4.1 Franchisor's claims for injunctive or other extraordinary relief;
10.4.2 disputes and controversies arising from the Sherman Act, the Clayton Act or any other federal or state antitrust law;
10.4.3 disputes and controversies based upon or arising under the Lanham Act, as now or hereafter amended, relating to the ownership or validity of the Marks; and
10.4.4 enforcement of Developer's post-termination obligations, including but not limited to, Developer's non-competition covenants.
Source: Item 23 — RECEIPT (FDD pages 45–182)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the enforcement of a Fly Fitness developer's post-termination non-competition covenants is not subject to mediation or arbitration. The document specifies that claims related to the enforcement of these covenants are exempt from the standard dispute resolution processes of mediation and arbitration. This means that Fly Fitness can directly pursue legal action, such as seeking an injunction, to enforce these covenants without first going through mediation or arbitration.
This exception benefits Fly Fitness by allowing them to quickly address potential breaches of the non-competition agreements, which are designed to protect the brand's market position and confidential information. Non-competition covenants typically restrict a franchisee from engaging in similar business activities within a certain geographic area and time frame after the termination of the franchise agreement.
For a prospective Fly Fitness franchisee, this means that the franchisor can act swiftly and decisively to enforce the non-compete obligations. While this protects the Fly Fitness system, it also implies that a franchisee found in violation of these covenants may face immediate legal action without the opportunity for mediation or arbitration. Franchisees should, therefore, carefully consider the scope and enforceability of these covenants before entering into an agreement with Fly Fitness.