Will a Fly Fitness franchisee receive compensation for sales made by Fly Fitness through Alternate Distribution Channels within the franchisee's territory?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
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 sales that Fly Fitness makes through Alternate Distribution Channels within the franchisee's territory. Fly Fitness reserves the right to offer services and products through any channel other than a dedicated Fly Fitness outlet, such as schools, camps, institutional/professional campuses, conferences, retail outlets (including grocery, health, and fitness outlets), and the Internet, which are defined as "Alternate Distribution Channels."
This means that Fly Fitness retains the right to sell its products and services through various channels within a franchisee's territory without sharing any of the revenue with the franchisee. These alternate channels could potentially compete with the franchisee's business, as Fly Fitness could directly target customers within the franchisee's defined area.
For a prospective franchisee, this is a crucial point to consider. While the franchise agreement grants the right to operate a Fly Fitness outlet within a specific territory, Fly Fitness maintains control over other distribution methods. A potential franchisee should evaluate the possible impact of these alternate distribution channels on their potential revenue and profitability. It would be prudent to discuss with Fly Fitness the specific plans for these alternate distribution channels within the territory and to assess the potential for competition and cannibalization of sales.