If Fly Fitness exercises its right of first refusal, how long does it have to close the purchase?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
- 16.6.2. Franchisor has the right, exercisable by written notice to Franchisee within thirty (30) days after receipt of written notification and copies of all documentation
required by Franchisor describing such offer, to buy the interest in this Agreement and the Franchised Business or the Principal's interest in Franchisee for the price and on the terms and conditions contained in the offer, subject to Section 16.6.3.
16.6.3.
Franchisee further agrees, in the event Franchisor exercises its right of first refusal, notwithstanding anything to the contrary contained in the offer, that (i) Franchisor may substitute cash for any other form of consideration contained in the offer; (ii) at Franchisor 's option, Franchisor may pay the entire purchase price at closing; (iii) Franchisor 's credit will be deemed equal to the credit of any proposed transferee; (iv) Franchisor will have at least sixty (60) days to close the purchase; and (v) Franchisor will be entitled to receive from the Franchisee all customary representations and warranties given by a seller of the assets of a business or equity interest in an entity, as applicable.
Source: Item 22 — CONTRACTS (FDD pages 44–45)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, if a franchisee wishes to transfer their interest in the franchise, Fly Fitness has a right of first refusal. Fly Fitness has thirty (30) days after receiving written notification of the offer to decide whether to exercise this right.
If Fly Fitness exercises its right of first refusal, the franchise agreement stipulates several conditions that override any terms in the franchisee's original offer. Specifically, Fly Fitness can substitute cash for any other form of consideration, pay the entire purchase price at closing, and will have at least sixty (60) days to close the purchase. Additionally, Fly Fitness is entitled to customary representations and warranties from the franchisee, similar to those given by a seller in an asset or equity sale.
This clause provides Fly Fitness with considerable flexibility and control over who becomes a new franchisee. The sixty-day closing period gives Fly Fitness ample time to arrange financing and complete due diligence. For a franchisee looking to sell, this means they must be prepared for a potentially longer closing period if Fly Fitness decides to exercise its right of first refusal. The franchisee must also provide standard seller warranties, adding a layer of legal obligation to the transaction.