What happens if a Fly Fitness franchisee is in default of their Multi-Unit Development Agreement?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
During the term of your Multi-Unit
Development Agreement, provided that you are not in default of your Agreement or development schedule, we will not open another Fly Fitness outlet or grant the right to anyone else to open a Fly Fitness outlet within your development area until the expiration or sooner termination of your Multi-Unit Development Agreement. However, notwithstanding this limited protection right we grant to you, we reserve all rights to sell our products and services under the Mark in the development area through alternative distribution channels, as discussed below.
Source: Item 12 — TERRITORY (FDD pages 29–31)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, if a franchisee is in default of their Multi-Unit Development Agreement, Fly Fitness retains the right to open additional Fly Fitness outlets or grant the right to others to do so within the franchisee's development area. This right exists until the Multi-Unit Development Agreement expires or is terminated sooner. This means the franchisee loses the limited protection they would otherwise have had in their development area.
Even with a Multi-Unit Development Agreement, Fly Fitness retains the right to sell products and services under its brand name within the development area through alternative distribution channels, regardless of whether the franchisee is in default. These alternative channels could include retail outlets, captive market locations like airports and malls, and the Internet. The franchisee will not receive any compensation for sales made through these alternative distribution channels.
This clause highlights the importance of adhering to the terms of the Multi-Unit Development Agreement. Defaulting on the agreement can lead to increased competition from Fly Fitness itself or from other franchisees within the franchisee's designated development area. Prospective franchisees should carefully review the terms of the Multi-Unit Development Agreement and understand the implications of default before entering into such an agreement.