Is a Fly Fitness franchisee's rights impaired if Fly Fitness implements its reserved rights?
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's rights are not considered impaired or injured if Fly Fitness exercises its reserved rights. Fly Fitness retains full rights to businesses beyond those specifically granted to the franchisee in the agreement. These reserved rights include offering other products or services not under the Fly Fitness marks, introducing other fitness concepts under different trademarks, and distributing products and services through alternative channels within the franchisee's territory. These alternative channels include schools, camps, institutional campuses, retail outlets, and the internet.
Fly Fitness franchisees will not receive any compensation for sales made by Fly Fitness through these alternative distribution channels within their territory. This means that while a franchisee has an exclusive territory for a physical Fly Fitness outlet, Fly Fitness can still operate other businesses or sales channels within that same territory without sharing any revenue with the franchisee.
This clause is significant for prospective franchisees as it clarifies the scope of their territorial exclusivity. While franchisees are protected from other franchised Fly Fitness outlets in their territory, they are not protected from competition from Fly Fitness itself through other business models or distribution methods. Franchisees should carefully consider the potential impact of these alternative channels on their business's revenue and profitability.