What happens if a Fly Fitness developer does not comply with their obligations under the Development Agreement?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
7.1 Default and Automatic Termination. Developer shall be deemed to be in material default under this Agreement, and all rights granted herein shall automatically terminate without notice to Developer, if any Developer shall become insolvent or makes a general
- 7.3 Curable Defaults.
Developer shall be deemed to be in material default and Franchisor may, at its option, terminate this Agreement and all rights granted hereunder, if Developer fails to cure the default within the time period set forth in this Section 7.3, effective immediately upon notice to Developer, if Developer:
7.3.1 fails to pay when due any amounts due to Franchisor under this Agreement or any related agreement and does not correct the failure within five (5) days after written notice; provided, however, Franchisor has no obligation to give written notice of a late payment more than two (2) times in any twelve (12)–month period, and the third such late payment in any twelve (12)–month period shall be a non-curable default under Section 7.2;
7.3.2 fails to perform any non-monetary obligation imposed by this Agreement (excepting those defaults of obligations set forth in Sections 7.1 and 7.2 for which there is no opportunity to cure) and such default shall continue for five (5) days after Franchisor has given written notice of such default, or if the default cannot be reasonably corrected within said five (5)-day period, then if it is not corrected within such additional time as may be reasonably required assuming Developer proceeds diligently to cure; provided, however, Franchisor has no obligation to give written notice of a non-monetary default more than two (2) times in any twelve (12)–month period, and the third such default, whether monetary or non-monetary, in any twelve (12) – month period shall be a non-curable default under Section 7.2.
7.4 Post-Termination Obligations.
Upon termination or expiration of this Agreement, all rights and licenses granted hereunder to Developer shall immediately terminate and Developer shall (i) immediately cease all development operations pursuant to this Agreement; and (ii) comply with the non-disclosure and non-competition covenants contained in Article 8.
Source: Item 23 — RECEIPT (FDD pages 45–182)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, a developer can be in material default of the Development Agreement, which can lead to termination of the agreement. If a developer becomes insolvent or makes a general assignment for the benefit of creditors, all rights granted in the agreement automatically terminate without notice.
Fly Fitness may terminate the agreement if the developer fails to pay amounts due to Fly Fitness and does not correct the failure within five days after written notice. However, Fly Fitness is only obligated to give written notice of a late payment twice in a 12-month period; a third late payment in that period is a non-curable default. Similarly, if a developer fails to perform any non-monetary obligation, and the default continues for five days after written notice from Fly Fitness, the company may terminate the agreement. As with monetary defaults, Fly Fitness is only obligated to provide written notice for non-monetary defaults twice in a 12-month period.
Upon termination or expiration of the Development Agreement, all rights granted to the developer immediately terminate, and the developer must cease all development operations. The developer must also comply with the non-disclosure and non-competition covenants outlined in the agreement. These covenants restrict the developer from engaging in activities that could harm Fly Fitness's business or goodwill, such as diverting customers to competitors or participating in a competitive business within a specified distance of a Fly Fitness location.