Will a Fly Fitness franchisee receive compensation for the franchisor's sales through Alternate Distribution Channels made within the franchisee's territory?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
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.
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, a franchisee will not receive compensation for the franchisor's sales through Alternate Distribution Channels within the franchisee's territory. Fly Fitness retains the right to offer services and products through various channels, such as schools, camps, institutional campuses, conferences, retail outlets (including grocery, health, and fitness stores), and the Internet; these are defined as "Alternate Distribution Channels."
This means that while a Fly Fitness franchisee is granted a territory to operate their dedicated Fly Fitness outlet, the franchisor can still sell products and services through other avenues within that same territory without sharing any of the revenue with the franchisee. These alternate channels could potentially compete with the franchisee's business, as customers might choose to purchase Fly Fitness products or services through these channels instead of directly from the franchisee's location.
For a prospective franchisee, this is an important consideration. It highlights a potential limitation on their revenue-generating capacity and introduces an element of competition from the franchisor itself. It is essential to understand the extent to which Fly Fitness intends to utilize these Alternate Distribution Channels within a franchisee's territory and how that might impact the franchisee's profitability. A prospective franchisee should inquire about Fly Fitness's strategy for managing these channels and ensuring they do not unduly detract from the franchisee's business.