What happens to the monies in the Fly Fitness Brand Fund if it is terminated?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
As of our fiscal year ended December 31, 2023, no Brand Fund contributions were required, made, or expended. Although the Brand Fund is intended to be of perpetual duration, we may terminate it at any time and for any reason or no reason. We will not terminate the Brand Fund, however, until all monies in the Brand Fund have been spent for advertising or promotional purposes or returned to contributors, without interest, on the basis of their respective contributions.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 22–29)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the Brand Fund is intended to be of perpetual duration. However, Fly Fitness retains the right to terminate the Brand Fund at any time, for any reason, or for no reason at all. If the Brand Fund is terminated, all monies in the fund must be spent for advertising or promotional purposes. Alternatively, the funds may be returned to the contributors, without interest, based on their respective contributions.
This clause protects franchisees by ensuring that if the Brand Fund is discontinued, the contributions already made are used appropriately, either by continuing to promote the Fly Fitness brand or by refunding the money to the franchisees who contributed. This is a fairly standard practice in franchising, as it ensures that franchisees receive some benefit from their contributions even if the fund is terminated.
Prospective franchisees should consider the implications of Fly Fitness's ability to terminate the Brand Fund at any time. While the FDD specifies how the funds will be disbursed, franchisees should evaluate whether the potential benefits of the Brand Fund outweigh the risk of its possible termination. It would be prudent to inquire with Fly Fitness about the circumstances under which the Brand Fund might be terminated and what factors would influence such a decision.