What is the Fly Fitness franchisee's obligation if they lose the right of possession of the real property?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
FOR VALUE RECEIVED, the undersigned ("Assignor") hereby assigns and transfers to Fly Fitness Franchise, L.L.C., address of 201 North 13th Street, Suite 1A, Lincoln, Nebraska 68508 ("Assignee"), all of Assignor's right, title, and interest as tenant in, to and under that certain lease, a copy of which shall be attached hereto (the "Lease") respecting premises commonly known as a Nebraska limited liability company, with a notice This Assignment is for collateral purposes only and except as specified herein, Assignee shall have no liability or obligation of any kind whatsoever arising from or in connection with this Assignment or the Lease unless Assignee takes possession of the premises demised by the Lease pursuant to the terms hereof and assumes the obligations of Assignor thereunder.
Assignor represents and warrants to Assignee that Assignor has full power and authority to so Assignor's interest in the Lease or the premises assign the Lease and Assignor's interest therein and that Assignor has not previously assigned or transferred, and is not obligated to assign or transfer, any of demised thereby.
Upon a default by Assignor under the Lease or under the franchise agreement for a Fly Fitness outlet between Assignee and Assignor (the "Franchise Agreement"), or in the event of a default by Assignor under any document or instrument securing the Franchise Agreement, Assignee shall have the right and is hereby empowered to take possession of the Premises demised by the Lease, expel Assignor therefrom, and, in such event, Assignor shall have no further right, title or interest in the Lease.
Assignor agrees that it will not suffer or permit any surrender, termination, amendment, or modification of the Lease without the prior written consent of Assignee.
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, a franchisee's obligations upon losing possession of their real property are detailed in the Conditional Assignment of Lease agreement. This agreement stipulates that the franchisee (Assignor) assigns their rights, title, and interest in the lease to Fly Fitness Franchise, L.L.C. (Assignee) as collateral.
Upon a default by the franchisee under the lease, the franchise agreement, or any document securing the franchise agreement, Fly Fitness has the right to take possession of the premises and expel the franchisee. In such an event, the franchisee forfeits all further rights, title, or interest in the lease.
Furthermore, the franchisee is prohibited from surrendering, terminating, amending, or modifying the lease without obtaining prior written consent from Fly Fitness. This ensures that Fly Fitness maintains control over the lease and the premises in case of franchisee default or other adverse events. This arrangement protects Fly Fitness's interests by allowing them to maintain control over the location and potentially re-franchise it or operate it themselves, minimizing disruption to the brand and system.
This is a fairly standard practice in franchising, as it allows the franchisor to protect their brand and system in the event that a franchisee is unable to continue operating their business. Prospective franchisees should carefully review the lease agreement and the Conditional Assignment of Lease to fully understand their obligations and the circumstances under which they could lose possession of the premises.