For a Fly Fitness franchise, who benefits from the franchise agreement?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
This Agreement shall bind and inure to the benefit of the successors and assigns of Franchisor and shall be personally binding on and inure to the benefit of Franchisee (including the individuals executing this Agreement on behalf of the Franchisee entity) and its or their respective heirs, executors, administrators and successors or assigns; provided, however, the foregoing provision shall not be construed to allow a transfer of any interest of Franchisee or Principal(s) in this Agreement or the Franchised Business, except in accordance with Article 16 hereof.
Franchisee agrees that Franchisor has the right, now or in the future, to purchase, merge, acquire or affiliate with an existing competitive or non-competitive franchise network, chain or any other business regardless of the location of that chain's or business' facilities, and to operate, franchise or license those businesses and/or facilities operating under the Marks or any other marks following Franchisor's purchase, merger, acquisition or affiliation, regardless of the location of the facilities (which Franchisee acknowledges may be within the Territory, proximate thereto, or proximate to any of Franchisee's locations).
However, Franchisor represents that it will not convert any such acquired facilities that are operating within the Territory to a Fly Fitness franchise during the Term of this Agreement.
Franchisee's rights and duties under this Agreement are personal to Franchisee as it is organized and with the Principals of the business as they exist on the date of execution of this Agreement, and Franchisor has made this Agreement with Franchisee in reliance on Franchisor's perceptions of the individual and collective character, skill, aptitude, attitude, business ability, and financial capacity of Franchisee.
Thus, no transfer, as hereafter defined, may be made without Franchisor's prior written approval.
On Termination of the Franchise Agreement, or on periodic request of Franchisor, Franchisee will immediately:
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.
3.1 Territory. This Agreement grants Franchisee the right to operate the Franchised Business at a single location and from within the Territory. Subject to Section 3.2 below, Franchisor agrees that during the Term of this Agreement, Franchisor will not operate, and will not authorize any other franchisees to operate, a Fly Fitness outlet in the Territory using the same Marks as licensed to Franchisee in this Agreement so long as Franchisee is not in default under this Agreement or this Agreement has not been terminated. Except as otherwise specified in this Agreement, Franchisor reserves the right to open, operate or franchise Fly Fitness franchises bordering and adjacent to the Territory. Except as set forth in this Agreement, Franchisee is prohibited from serving and soliciting customers outside of the Territory and from alternative methods of distribution as more fully specified herein.
3.2 Reservation of Rights. Franchisee understands and agrees that all rights to any businesses, other than as specified in this Agreement, are fully reserved to Franchisor within or outside of the Territory. By way of example only, Franchisor reserves the rights to offer (i) other products or services not offered under the Marks, (ii) other fitness concepts under the Marks or other trademarks, and (iii) services and products through any channel in the Territory other than a dedicated Fly Fitness outlet, such as to schools, camps, institutional/professional campuses, and conferences; distribution of products through retail outlets, including but not limited to, grocery, health and fitness outlets; and the Internet ("Alternate Distribution Channels"). Franchisee will receive no compensation for Franchisor's sales through Alternate Distribution Channels made within the Territory. Franchisee agrees that such implementation of Franchisor's rights pursuant to this Section 3.2 is deemed not to impair or injure Franchisee's rights pursuant to Section 2 hereof.
Unless terminated earlier in accordance with the terms set forth in this Agreement, this Agreement and the Franchise granted hereunder shall commence upon the Effective Date set forth above and terminate on the date that is ten (10) years following the Opening Date, as defined in Section 8 hereof (the "Term").
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the franchise agreement is designed to benefit both the franchisor and the franchisee. The agreement outlines the rights and responsibilities of each party, ensuring that both can operate successfully within the Fly Fitness system. The franchisor benefits by expanding the brand's reach and collecting franchise fees and royalties, while maintaining certain controls over brand standards and quality. The franchisee benefits by gaining access to the Fly Fitness brand, system, training, and support, which can increase their chances of success compared to starting an independent fitness business.
Specifically, the agreement grants the franchisee the right to operate a Fly Fitness business at a single location within a defined territory for a term of ten years, provided they are not in default of the agreement. Fly Fitness agrees not to operate or authorize other franchisees to operate a Fly Fitness outlet in the same territory. However, Fly Fitness retains the right to pursue alternative distribution channels, such as offering services through schools, camps, retail outlets, and the internet, without compensating the franchisee for sales made through these channels. This reservation of rights allows Fly Fitness to explore additional revenue streams and adapt to changing market conditions.
The agreement also addresses the transfer of rights and obligations. Fly Fitness has the right to assign the agreement to another entity without the franchisee's permission, provided the assignee assumes Fly Fitness's obligations. The franchisee's rights and duties are personal and cannot be transferred without Fly Fitness's prior written approval, as Fly Fitness relies on the franchisee's individual character, skills, and financial capacity. This ensures that any new franchisee meets Fly Fitness's standards and is capable of operating the business successfully. Upon termination of the franchise agreement, the franchisee must transfer any interest in web sites, social media accounts, and telephone listings related to the Fly Fitness brand back to Fly Fitness.
Furthermore, the agreement includes provisions to protect Fly Fitness's brand and system. During the term of the agreement and for a period of time after termination, the franchisee is restricted from engaging in any business that competes with Fly Fitness or from soliciting Fly Fitness's employees. This non-compete clause protects Fly Fitness from unfair competition and ensures that the franchisee remains committed to the success of the Fly Fitness system. The franchisee also agrees to indemnify Fly Fitness against any losses or liabilities arising from the operation of the franchised business. Overall, the franchise agreement aims to create a mutually beneficial relationship between Fly Fitness and its franchisees, while also protecting Fly Fitness's brand and system.