Is a Fly Fitness franchisee granted an exclusive territory under the Franchise Agreement?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
Closeouts Sample Non Disclosure Sample
ITEM 12: TERRITORY
Under the Franchise Agreement, you have the right to establish and operate one (1) Fly Fitness outlet within a territory (the "Territory"). You are required to find and obtain possession of a specific location in your Territory for your Franchised Business that meets our site selection standards and our approval. Your Territory is located in all or a portion of a listed town, city, or county, and is identified by a group of contiguous zip codes. The Territory is determined on an individual basis taking into account area demographics and population density. The minimum Territory granted is an area with a minimum population of approximately 20,000. Your Territory will be defined and attached to your Franchise Agreement as Attachment 2. If you do not yet have a location at the signing of the Franchise Agreement, you will receive a non-exclusive site search area list as Attachment 2.
You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
During the term of your Franchise Agreement, and provided that you are not in default of your Franchise Agreement, we will not open another Fly Fitness outlet or grant the right to anyone else to open a Fly Fitness outlet within the Territory. However, notwithstanding this limited protection right we grant to you, we reserve all rights to sell our products and services under the Marks in the Territory through alternative distribution channels, as discussed below. There is no minimum sales requirement, market penetration, or other contingency that will affect your limited protected right to operate in the Territory during the term of your Franchise Agreement, unless you are in default of your obligations to us.
You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. During the term of your Multi-Unit
Development Agreement, provided that you are not in default of your Agreement or development schedule, we will not open another Fly Fitness outlet or grant the right to anyone else to open a Fly Fitness outlet within your development area until the expiration or sooner termination of your Multi-Unit Development Agreement. However, notwithstanding this limited protection right we grant to you, we reserve all rights to sell our products and services under the Mark in the development area through alternative distribution channels, as discussed below.
You may not change the location of your Franchised Business, without our written consent, which we may withhold in our sole discretion. The conditions under which we may allow you to relocate include the following: loss of your premises not due to your default, demographics of the surrounding area, proximity to other Fly Fitness outlets, lease requirements, traffic patterns, vehicular and pedestrian access, proximity to major roads, available parking, and overall suitability. If you wish to relocate, you must identify a new location for the Franchised Business that meets our approval, in accordance with our then-current site selection procedures, within 60 days. If you do not identify a site within this time period, we may terminate the Franchise Agreement. While you are closed for relocation, you must continue to pay us a minimum Royalty and Brand Fund contribution equal to the average paid during the four (4) calendar quarters immediately preceding the loss of your premises. Should we consent to your relocation, you will be required to pay us a relocation fee equal to twenty-five percent (25%) of the then-current initial franchise fee.
Unless you have entered into a Multi-Unit Development Agreement, we may, but have no obligation to, consider granting to you the right to establish additional Fly Fitness outlets under other franchise agreements if you are in compliance with the Franchise Agreement and propose to open another Fly Fitness outlet in an area and at a location we approve. The Franchise Agreement grants you no options, rights of first refusal or similar rights to acquire additional franchises.
We reserve all rights not expressly granted in the Franchise Agreement.
Source: Item 12 — TERRITORY (FDD pages 29–31)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, franchisees do not receive an exclusive territory. While a franchisee is granted a Territory, defined by contiguous zip codes with a minimum population of approximately 20,000, Fly Fitness retains the right to sell products and services through alternative distribution channels within that territory. This means that even though Fly Fitness will not open another outlet or grant another franchise the right to open an outlet in the franchisee's territory, they can still sell through other means such as retail outlets, captive market locations, and the internet.
This lack of exclusivity means that a Fly Fitness franchisee may face competition from other franchisees, company-owned outlets, and other distribution channels controlled by Fly Fitness, even within their designated territory. The franchisee's local advertising should target customers within their territory, but the reach of that advertising may extend beyond it. The Franchise Agreement does not grant franchisees any rights to participate in franchises, licensing programs, or other business proposals for sales and distribution through these alternative channels.
Fly Fitness also reserves the right to operate other kinds of businesses within the Territory, including those offering similar products or services not offered under the Fly Fitness brand. They also reserve the right to merge with or be acquired by a competitive business, but they will not convert any acquired business in the franchisee's Territory to a Fly Fitness franchise during the term of the Franchise Agreement. This should be carefully considered by potential franchisees as it could impact their business operations and revenue potential.